The CHF26bn (€21bn) BVK has generated a return of 7.4% in its last year as a public pension fund, raising its funding level to 96.1% from less than 90% in 2012.

The pension fund for the Swiss canton of Zurich has also been reorganised as a private foundation as per 1 January, meaning that it will now have to achieve full funding and maintain sufficient buffers.

According to a statement, the BVK said the transition to an independent foundation would be “formally finalised” in the third quarter.

A trustee board has been named, while Thomas Schönbächler is to remain as managing director of the fund, which in recent years has weathered the storm of a corruption trial against its former head of asset management.

Over 2013, the pension fund outperformed its benchmark by 80 basis points.

It also outperformed the average Swiss Pensionskasse, which returned approximately 6% over the period. 

The BVK’s strategic equity allocation is at 30%, with another 41% in fixed income and a relatively high real estate allocation at 22%, the vast majority of which is in directly held Swiss properties.

To ensure alignment of interest between the managers of the property and the BVK as owner, the pension fund will be integrating the employees of its external facility manager in the coming months, it said.

“This will ensure the properties are managed according to the investment strategy,” the fund said.

The BVK said it was already well placed for its future as an independent foundation, as it operates with a relatively low total expense ratio (TER).

All Swiss Pensionskassen have to calculate this benchmark figure in future, but the BVK was the first to do so before it became mandatory. 

Currently, its TER stands at 0.19%.

For 2009, Swiss consultancy c-alm calculated an average TER of more than 0.5% for Swiss Pensionskassen. 

The Zurich pension fund also pointed out re-negotiating mandates had helped it save CHF70m annually compared with 2009.

 

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