SWITZERLAND - BVK, the CHF21bn (€12.9bn) canton of Zurich pension fund, says it finished 2006 with an above-average return and fully-funded status.

The scheme, which insures civil servants in the Swiss canton of Zurich, said its return for 2006 was 7.3%, or 0.7% above the average for other Swiss pension funds.

"Beating the benchmark did not come at the cost of abandoning our defensive investment strategy or letting risks get out of control," BVK noted.

Detailing its investment strategy during 2006, BVK said it increased exposure to equities by 6.3% to a total of 34%. At the same time, it reduced exposure to fixed income and convertible bonds - by 4.3% to a total of 22%.

The scheme also had 20% allocated to cash, 17% to real estate and 3% to alternatives, namely private equity and commodities, at the end of 2006.

According to BVK, the "pleasant result" for 2006 had a positive impact on its funding ratio, raising the figure to 101.4% at the end of 2006 from 97.6% a year earlier.

"But having achieved fully-funded status is just a first step. Now we aim to build sufficient reserves to withstand negative fluctuations on capital markets and to avoid falling back into deficit," the scheme said.

The public scheme also ruled out passing on any surplus return to its 64,000-odd insured members, beyond that which is guaranteed. Under Swiss law, pension funds must guarantee a minimum return of 2.5% for their insured.

BVK's attitude toward surplus return contrasts sharply with that of other Swiss schemes.

Earlier this week, Transparenta, a multi-employer pension fund, said it would pass on a surplus return equalling 2.8% to its almost 3,000 insured. The return will be passed on either via enlarged savings or reduced contributions to the scheme.

Transparenta said it was in a position to do this as its funding ratio had reached 111% of liabilities.