The funding ratios of Swiss private pension funds, as well as those of fully and partially funded public schemes, declined in the third quarter of this year as a result of volatility in bond and equity markets.

The funding ratios of Swiss private pension funds fell from 113.6% in the first half of 2023 to 112.6% in Q3, according to the Pensionskassen Monitor published by Swisscanto.

Fully funded pension schemes recorded a funding level of 104.6% in Q3, down from 105.7% in Q2. The funding ratios of partially funded schemes also declined quarter-on-quarter to 83.2%, figures showed.

The number of pension funds in underfunding has, however, only increased slightly, from 1.3% to 1.6% in the case of private schemes, while the share of underfunded and fully funded pension schemes stagnated in the third quarter at 8.1%.

The share of partially funded pubic schemes with funding shortcomings, at 88.9%, also remained unchanged in the last quarter.

Commodities keep up performance

Swiss pension funds returned -0.5% in the third quarter of this year, but the performance so far this year remained positive at 3.6%, according to the study.

Commodities was the only asset class to outperform in Q3, returning 7%, as the situation in the oil market remained tense, according to Swisscanto. Equities recorded a sharp decline, with Swiss equities returning -3.3% and world equities -1.2%.

Bonds hedged in Swiss francs (-2.8%), unhedged foreign bonds (-1.4%), and Swiss bonds (-0.1%) also lost ground in the third quarter of this year, Swisscanto’s figures showed.

The negative performance of bonds and equities was mostly the result of rising bond yields based on market expectations that central banks would stick to a policy of “higher for longer” interest rates, Swisscanto noted.

Year-to-date, however, equity returns remained positive (9.3% for world equities and 4.6% for Swiss equities), while in fixed income only Swiss bonds landed in positive territory at 3.6% so far this year, according to the report.

Swiss direct and indirect real estate investments returned 1.3% year-to-date, while hedge funds returned -1.6%.

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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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