Swiss pension funds have recorded the highest returns in the last financial year with investments in alternatives, a result reinforcing the asset owners’ confidence in the asset classes which are replacing bonds carrying low yields in strategies.
Private equity delivered the best absolute return of 45.44% in 2021 at Asga Pensionskasse, the provider of occupational pensions for small and medium-sized companies. The pension fund achieved an overall return last year of 10.16%, 1.23% above its benchmark, further improving its funding ratio to 122.66%, it said in a financial statement.
Infrastructure also contributed with a positive return of 15.55%, while the drawdown management portfolio benefited from long positive trends in the equity and energy markets over the year and was up 11.09%.
At the pension fund for the Swiss retail and wholesale company Coop-Gruppe, CPV/CAP, alternatives topped returns among other asset classes with 26.7% in 2021, well above its strategic benchmark of 13.8%, according to the pension fund’s latest financial statement.
Under alternatives, infrastructure include investments in infrastructure and renewable energies. The return on its infrastructure portfolio was 2.5% in 2021.
CPV/CAP has reviewed its strategic allocation following a new rule in the framework for occupational pensions (BVV2) splitting infrastructure from the alternatives bucket to boost investments in the asset class.
The pension fund has set a strategic investment target for infrastructure of 4%, while reducing alternative investments from 13% to 11%. Investment in alternatives, including infrastructure, increased however strategically from 13% to 15%, two percentage points at the expense of foreign currency bonds.
CPV/CAP’s overall returns stood last year at 8.6%, above its 7.3% benchmark, with Swiss equities returning 23.4%, foreign equities 16.5%, Swiss real estate 5.2%, real estate abroad 7.7%, foreign currency bonds 0.9%, Swiss bonds -1.3% and liquidity -0.3%.
Assets under management rose to CHF11.84bn (€11.5bn) in 2021 from CHF10.83bn in 2020. Its funding ratio improved year-on-year to 120.3%, and the number of members increased to 60,445.
CPV/CAP allocated last year the largest share of its assets to Swiss real estate (21.3%), followed by foreign equities with 21.1%, 15.7% in Swiss bonds, 12% in alternatives,10.4% in bonds in foreign currency, 7.9% in Swiss equities, 5.5% in foreign real estate, 3.8% in cash, and 2.3% in infrastructure.
Asga allocated instead the largest share of its assets to equities – foreign (22.4%) and Swiss (11-08%). Swiss equities returned 23.33% last year and foreign equities 23.17%.
The pension fund allocated the remaining part of its portfolio in 2021 to private equity (3.27%), Swiss real estate (3.27%), foreign real estate (9.15%), infrastructure (3.61%), timber and agriculture (0.32%), drawdown management (2.96%), Swiss bonds 19.14% (down from 21.3% in the prior year), corporate bonds in foreign currencies 7.33% (down from 7.6% in 2020), senior secured loans (3.81%) and cash (3.43%).
In the past year cash (–0.46%), Swiss bonds (–1.48%) and corporate foreign bonds (–0.18%) carried negative returns.
Its senior loans, on the other hand, recorded a positive return (5.95%), in part because of the exchange rate gains in US dollars. Real estate also achieved stable positive returns, with Swiss direct investments gaining 3.58%, and foreign real estate 11.97%.
Assets under management at Asga rose year-on-year in 2021 to CHF24.8bn, from CHF21.7bn in 2020. The number of member companies increased by 1,378 year-on-year in 2021 to reach a total of 15,353. The pension fund added 6,519 members to reach 136,946.
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