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Switzerland's Ticino mulls strategy change

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SWITZERLAND - The CHF2.68bn (€1.73bn) pension fund for the public employees of the Ticino canton is set to change its investment strategy after seeing its solvency ratio fall below 70% in 2004.

According to a release issued by the pension fund, its solvency ratio fell from 71.2% in 2003 to 69.8% in 2004 - reflecting a decline which has been going on since 1999.

Fund director Edy Dell'ambrogio told IPE that the scheme's administrative board, which in 2004 faced liabilities of CHF3.8bn, is considering structural and organisational changes.

"We are considering the possibility of a new organisation," he told IPE.

The review could lead to the implementation of a core-satellite structure or the award of specialised mandates, to replace the current balanced mandates.

It follows a set of measures to bridge the deficit gap, which have been in place since January.

Employer contributions have risen from 11.6% to 15.6%, while employees pay an extra one percent. Indexation has also been reduced to 50% of inflation.

In addition, the fund has economised on the compensation paid to and members who retire before 65 years, when they are eligible for the first pillar pension.

Before January such members would be entitled to an 80% compensation rate, mainly paid by the pension fund. With the new rules, the costs are to be met mainly by employer and employee contributions.

Dell'Ambrogio explained that the asset management team had remained unchanged since 2003, when the fund returned 6.08% - its best result since 1997.

In 2004 returns amounted to 3.86%.

The fund's management team comprises UBS Global Asset Management, Credit Suisse Asset Management, Banca della Svizzera Italiana, Banca del Gottardo, Rothschild Private Bank, Banca dello Stato del Canton Ticino.

Currently the fund allocates three percent of its portfolio to liquidity, 59% to Swiss bond investments as well as loans and mortgages, eight percent to foreign bonds. It has 20% in equities and 10% in real estate.

Dell' Ambrogio said the internal management team is in charge of the property and Swiss bonds, loan and mortgages investments.

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