SWITZERLAND - Direct ownership of domestic property helped Swiss pension funds bring up their performance from just under 1% on average last year to over 2%.

According to the Credit Suisse Pensionskassenindex, average returns of funds - which have the Swiss banking group as their custodian - were at 2.04% for 2007.

State Street calculated a similar index based on their clients' portfolios with a return of just 0.66%.

"It might be that our clients were just lucky," a spokesman for Credit Suisse told IPE.

However, he added Credit Suisse looks at all asset classes, including direct real estate and mortgages, for the calculation  but which are not held by a custodian.

State Street confirmed they did not include these assets "on purpose".

"Currently we could only estimate their impact on the portfolios as we will only get detailled figures on these allocations from our clients in March or April," explained Reto Tschäppeler, State Street vice president in Zurich and regional head of State Street Investment Analytics in Europe.

Directly-held domestic real estate, making up over 10% of the average portfolio, returned around 4% last year.

Credit Suisse noted the spread between their worst and their best performing client was larger than in previous years with returns from -2% to 6%.

"I would not go as far as to say the last year separated the wheat from the chaff - that would be too hard," the spokesman said.

State Street said it could not see a similar trend among its clients as they were almost exclusively large pension funds with a similar asset allocation.

Tschäppeler confirmed for the first time in years only very few Pensionskassen will reach the legally required minimum return of 2.5%. (See earlier IPE story: Swiss pension funds miss minimum rate)