SWITZERLAND - Only Swiss bonds and Swiss real estate contributed positively to the performance of local pension funds last year but Swiss assets are a major contributor to long-term performance, a study by Lusenti has found.

The Swiss consultancy's biannual survey calculated Swiss pensionskassen generated an average -13.5% return in 2008, confirming similar studies. (See earlier IPE story: Swiss funds hit historic returns low)

Main contributors to the worst losses suffered since the mandatory system was put in, place in 1985, were foreign equities, with a -43% return, Swiss equities which lost 32% and foreign real estate funds  which fell 27%, according to Lusenti.

None of the 131 pensionskassen surveyed managed to generate positive performance as Lucenti found the best return was -4.2% and the worst was -30.6%.

Alternative investments also ended the year negatively as hedge funds returned -18% for pensionskassen for hedge funds and private equity lost 13% on investments.

Swiss bonds contributed a positive 4.5% as did Swiss direct  real estate, producing 5.4% alongside +1.6% from indirect real estate.

Lusenti extrapolated there had also been a positive return of 2% for the funds for the year 2009 to the end of April. (See earlier IPE story: Negative Q1 for Swiss pension funds)

In this survey, however, Lusenti also looked at look at long-term performance and assessed which asset classes had contributed most over the last 20 years.

Bonds denominated in Swiss Francs turned out to be the most important contributor, accounting for 24% of the overall performance.

Domestic bonds were followed by Swiss equities returning 19%, while foreign equities returned 17% and foreign bonds  contributed 15% in performance.

That said, Swiss equities were also among those assets which portfolios were most sensitive too, Lusenti found.

Foreign equities, Swiss equities, overseas real estate investments, foreign bonds, hedge funds and private equity investments were those asset classes which had the most impact on portfolios, be it positively or negatively.

According to Lusenti, the average funding level has deteriorated to 89.63% and buffers are down to 1% of asset value instead of the 15% which funds are attempting to hold. (See earlier IPE story: Bulk of Swiss schemes now underfunded) 

Strategic asset allocations in the schemes had an 8.8% volatility in 2008 while at the end of the year the effective allocation had seen 7.5% volatility, suggesting there had been a decrease in the risk taken.

Nevertheless, the 2008 volatility rates remain 25% above the long-term 20-year level, noted Lusenti.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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