The pension fund for Swiss retailer Migros recorded a loss of 1.9% on its investments in 2018, its first negative annual result since 2008.

The only positive results of a “sobering” year for investments came from allocations to domestic and international real estate and Swiss franc “nominal value” assets, it said.

A high allocation to real estate of 32.5% could not offset losses on the equity markets, which collapsed at the end of the year, it added.

With €20bn of assets under management, Migros Pensionskasse was the fifth largest pension fund in Switzerland last year, according to IPE’s most recent Top 1000 European pensions guide.

Aargauische Pensionskasse (APK), Switzerland’s 20th largest pension provider, indicated a provisional net investment loss of more than 2% for 2018.

Earlier this month Publica, Switzerland’s largest pension investor, reported a provisional loss of 3.2% for 2019.

Aargau pension fund’s real assets allocations soften equities blow

APK, the pension fund for the canton of Aargau, said investments in the majority of its asset classes fell in value – although mortgages, real estate and infrastructure allocations made a positive contribution to the result for 2018.

Its funding ratio would likely have fallen below 100% compared with the beginning of 2018, it said.

APK’s board had decided that the interest rate on active members’ accrued savings would be 1% in 2019, which is the minimum level set by the government for mandatory pension accrual in Switzerland. Last year, the rate was 1.25%.

Reserves halved by investment losses

According to the quarterly Swisscanto pension funds monitor, Swiss pension providers’ reserves almost halved in 2018 as a result of investment losses. On average they fell from 14.4% to 7.7%.

However, private sector pension funds were still in surplus, with their coverage ratio estimated at 107.7%.

The average coverage ratio at public sector funds that need to be fully funded dropped from 107.8% to 101.5%, while at public law funds with a state guarantee the average fell from 83.5% to 78.6%. The latter group of pension funds need to be 80% funded by 2052.

The estimated 2018 performance for pension providers in the Swisscanto sample was a loss of 3.5%.

Switzerland’s worst year since 2008

According to an industry index compiled by UBS, last year was the worst year for performance since the global financial crisis for Swiss pension funds.

December was the worst month, with all pension funds’ investments declining in value. The best monthly result of the providers in its sample was an average decline of 0.7%, while the worst was a fall of 4.2%.

Credit Suisse’s index showed Swiss pension funds suffering heavy losses in the fourth quarter of last year. The index fell by 3.5% in that period, in particular as a result of performance in October (-1.4%) and December (-2.2%).

Equities accounted for the lion’s share of the negative performance in the fourth quarter, according to Credit Suisse.

Domestic equities weakened performance by 1.4% and foreign equities by 2.2%. Bonds delivered a mildly positive performance contribution of 0.2%.

Real estate also had a slightly positive impact of 0.1%, although this was offset by the decline of alternative investments by 0.1%. Mortgages had only a minor impact on the overall result.

According to Willis Towers Watson, which calculates a funding index for corporate pension plans in Switzerland, the coverage ratio fell 7.7 percentage points from 110% as of September to 102.3% as of the end of December.

A decline of this magnitude was last recorded seven years ago, according to the consultancy. 

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