PKBS, the CHF14.6bn (€14.9bn) Pensionskasse of the city of Basel, has decided to cease investments in insurance-linked securities, increasing instead its allocation to conventional fixed income and domestic real estate investments, it said in its latest financial statement for 2023.

Following an annual review of the fund’s investment strategy, the scheme’s board of directors decided to reduce its allocation to insurance-linked securities by 2%, to boost bond investments by 1% and domestic real estate by another 1%, the statement added.

“With interest rates changes, thoughts were given to reducing the complexity of the [fund’s] investment strategy, while maintaining the expected return. The adjustment was made based on cost/benefit considerations,” Susanne Jeger, the scheme’s chair of the executive board, told IPE.

The scheme’s insurance-linked securities’ asset managers include Leadenhall Capital Partners, LGT Capital Partners, Scor Investment Partners, and Securis Investment Partners, who manage an active portfolio that posted returns of -4.98% last year.

Within the asset class, life insurance represented a share of investments of almost 70%, which suffered last year with the sharp rise in US dollar interest rates. Natural catastrophes accounted for the remaining share of the investments posting positive returns due to high insurance premiums and lower claims’ amounts, according to the statement.

PKBS holds a core-satellite approach for its bond investments, with the core portfolio returning 7.69% last year, it added.

Domestic real estate allocations, consisting of 70% direct and 30% indirect investments, returned 2.21% in 2023. Investments in foreign real estate returned -12.64%, exclusively in indirect and unlisted foreign properties, with foreign currency risks systematically hedged, the report noted.

PKBS’s investment strategy has returned 4.87% in 2023, net of costs, above a target return of 2.35%. As a result, the scheme’s funding ratio rose overall from 99.20% to 102.40% over the course of the year, it stated.

The scheme started the new year on a positive note, recording a 4.21% performance as of the end of March, it added.

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Luigi is IPE's Berlin-based DACH correspondent. His coverage includes regulation and the latest pensions and investments trends, and, being a native Italian, he also covers Italy’s pensions market. He has reported from Italy and Germany on international politics and business for European and US publications including USA Today, Bloomberg BNA and for the investigative magazine L’Espresso. He was previously Germany correspondent for Mergermarket covering M&A.View full Profile

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