Publica, the CHF37bn (€34bn) pension fund for federal employees in Switzerland, achieved an estimated net return of 5.06% in 2016, saying its developed market investments contributed the most to performance, followed by emerging markets.
The return on its open portfolio was 5.1% and that on its investments for closed pension schemes 4.3%.
Publica is a collective institution comprising 20 pension schemes, seven of which are closed and 13 open.
It runs different investment strategies for the open and closed schemes, with that for the latter most notably featuring a bigger allocation to Swiss government bonds and direct domestic real estate investments.
The bulk of the assets under management at Publica are from the open pension schemes (CHF33.6bn).
In a statement, Publica described the 5.06% return for 2016 as “comfortable” and said it came close to the “pleasing” level of 2014 (5.87%).
The 2016 result would have been 5.88% without currency hedging, it said.
The pension fund noted that both its investment strategies outperformed their benchmarks by 0.35%.
It attributed this to the appreciation of its real estate investments and “positive tactical investment decisions overall”.
It highlighted its decision to invest 16% of the open schemes portfolio in emerging market bonds and equities, noting that these asset classes returned around 10% in 2016.
On a weighted basis, its emerging market investments’ contribution to the total return was 1.6%.
Publica said domestic real estate also performed well, returning almost 10% to contribute around 0.7% to the overall performance in 2016.
It said there were big regional differences in its equity portfolios’ performance in 2016, with emerging markets and North America on a currency-hedged basis gaining more than 10%, but Swiss and Japanese holdings posting a loss of 3%.
It said the contribution from equities to the overall performance was 2.4%, which is also the figure it cited for the contribution from its developed market investments.
Publica estimates that the average funded ratio at the 20 pension schemes it covers was 103% as at the end of 2016.
The performance for the total portfolio was a loss of 1.93%.