SWITZERLAND - The Swiss social security compensation fund AHV/AVS is changing direction to a more international slant, in both its real estate and bond portfolios.
The AHV/AVS fund was set up to plug the gap between social security expenditure (currently around the level of SFr40bn a year) and revenue from employers and employees, which varies according to economic conditions. The total value of the fund is around SFr19bn.
The real estate portfolio will diversify from a Swiss property to a global allocation. AHV’s property investments, managed by Rued Blass, amounted to 1.1% of the portfolio at the end of September 2002 and were worth SwFr220m. The strategic property allocation is set at 5%.
“The whole thing will be in indirect investments, split between quoted and non quoted investment products,” said Dominique Salamin, manager of the AHV/AVS fund.
“At the moment we have a quoted fund, but it is only a Swiss fund. It’s going to be international.” No decisions have yet been made on when the new strategy will be executed.
AHV/AVS’s strategic allocation for 2003 will see fixed income also move away from a domestic bias to a more international stance. Short-term Swiss bonds will be reduced from 37.6% to 20% of the portfolio, while long-term Swiss bonds will see a reduction from 31.7% to 25% of the portfolio. Global bonds at the same time will see their allocation rise from 10.6% to 25% of the portfolio.
“Our first big change will be to align the structure of the portfolio to the strategy. We have not yet started looking for managers,” said Salamin.
Salamin also revealed that the fund was seriously considering an allocation to hedge funds but had no firm plans: “It might happen. I don’t know when, maybe in the second quarter.
“We have no specific plans.”
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