Swiss pension funds 'financially stable' despite drop in returns

SWITZERLAND - The financial situation of Swiss pension funds continued to stabilise in 2010 in spite of a sharp fall in investment returns, the country's Federal Statistical Office (FSO) has claimed.

According to the FSO, even though net results from investment were considerably lower than in the previous year - totalling only CHF19.5bn (€15.8bn) in 2010 and falling by 65.4% over 2009 - Swiss pension funds recorded good results.

While risk reserves reached a total of CHF27bn, the schemes' deficit remained fairly constant at CHF35bn compared with CHF622.5bn in total assets, leading pension schemes in the country to stabilise their financial situation.

In addition, the data revealed that collective investments increased significantly over the years to reach CHF279.1bn in 2010, representing 45% of the total assets.

Collective investments enable the country's schemes to jointly invest in a fund, hire a manager and share costs - thus diversifying their investments more than they could if they had invested individually.

Investments abroad also became more important in 2010, with an increase of 17.1% in non-Swiss real estate and an 11.8% rise in investments made in foreign equities.

In total, Swiss pension funds invested CHF229bn in bonds and CHF170.1bn in equities in 2010.

However, this summer's market slump, as well as the strengthening of the local currency in the first half of 2011, has deeply impacted pension schemes' return on investments.

According to figures published by the pension fund association ASIP earlier this year, pension funds saw their return fall by 0.2% for the first six months to June.

In a previous interview with IPE, Patrice Vernier, director at Caisse de Prévoyance du Valais (CPVAL), said the fund had been highly exposed to the foreign exchange risk in recent months as the Swiss franc strengthened considerably against the US dollar and the euro.

Due to the losses stemming from the strong franc, the Swiss National Bank decided to set a minimum exchange rate at CHF1.20 per euro in August this year.