Swiss roundup: equities, real estate drive APK’s returns in 2020

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Aargauische Pensionskasse (APK), the Swiss pension fund for the employees of the Aargau canton, recorded returns on assets of 3.8% in 2020.

Equities, real estate and commodities contributed to the positive result, it said. Indirect investments in Swiss real estate returned 7.7%, foreign equities 6% and commodities (hedged) 4.6%, according to the fund’s financial report for 2020.

APK allocates 14.1% of its pension assets to foreign equities, 10% to Swiss equities, 9.2% to Swiss bonds, 6.6% to direct investment in Swiss real estate, 6.2% to real estate foundations, 4.6% to indirect real estate, 3.9% to foreign indirect real estate, 3.3% to commodities, 4% to infrastructure projects and 1.9% to private debt.

It also invests 3% in foreign government bonds, 4.8% in foreign corporate bonds, 3.4% in emerging market debt hard currency, 1.1% in emerging market debt in local currency, 4.2% in emerging market equities, 4.9% in mortgage loans, 2.9% in loans to affiliated employers, 6.4% in loans in general, 2% in insurance-linked securities, 1% in other alternative investments, with the remaining assets are in a liquidity portfolio.

The fund’s assets increased by CHF0.5m last year to a total of CHF12.1bn (€10.9bn). Its funding ratio fell by 0.7% year-on-year in 2020 to 104.2%.

APK financed the interest paid on pension capital, accrued liabilities and administrative costs in the year under review as a result of its positive performance.

The scheme applied an interest rate on pension capital of 1.25%. It will decrease the conversion rate from 5.3% to 5% from 2022.

APK piled up further pension provisions worth CHF225m as a consequence of a persistent low interest rate environment and a cut in the technical interest rate. The financial stability of the fund is guaranteed only with the full amount of reserves to buffer volatility on the equity market, it said.

Allianz slashes conversion rates

Allianz Suisse will gradually cut the conversion rates used to calculate pension pay-outs at the time of retirement from 2022.

Allianz, whcih has 14,000 affiliated companies and 85,000 insured in Switzerland, will reduce the rate on the minimum amount of retirement assets for men and women from 6.60% in 2022 to 6.40% in 2023 and to 6.20% from 2024.

The conversion rate on pension assets above the mandatory part of the occupation pension for women already insured in the first pillar pension system and with a minimum wage of CHF21,510 (€19,374) per year will fall from 4.60% in 2022 to 4.44% in 2023 and to 4.28% from 2024.

The conversion rate on men’s pension assets above the mandatory part of the occupation pensions will decrease from 6.65% in 2022 to 4.49% in 2023 and to 4.33% from 2024.

The plan to reform the second pillar pension system in Switzerland foresees a reduction of the conversion rate from the current 6.8% to 6.0%. Allianz has called for a “quick and significant reduction” of the second pillar’s conversion to guarantee the financial stability of the system and an equitable division of pension assets between generations.

PG Impact Investments launches climate strategy

PG Impact Investments, which is owned by the Swiss not-for-profit organization PG Impact Investments Foundation, has launched a climate growth strategy and is reshuffling its executive board.

It has hired Kayode Akinola from private equity firm KKR as a new member of the board to lead the new global private equity direct investments practice. Akinola will work together with Benjamin Hogan and Claude Kamga to put in place the climate growth strategy.

PG has a climate growth fund with a target size of $300m in the pipeline to support GHG neutrality, energy transition, electrification and circular economy.