SWITZERLAND - The investment horizon of Swiss pension funds has shortened with new asset classes being selected more frequently.
The results of the quarterly Swiss Institutional Survey as at December 31, 2004 revealed Swiss institutional investors are now allowing “relatively short” intervals between strategic and tactical allocation decisions. They are also adding new asset classes to their portfolios more frequently.
The survey, conducted by Lusenti Partners and sponsored by Credit Suisse Asset Management, covered 174 private and public sector pension funds, pooled foundations and insurance funds with combined assets of CHF214.7bn.
According to the research, public sector pension funds performed slightly better (4.9%) than their private sector counterparts (4.2%).
The average performance of Swiss institutions at year-end was 4.28%, weighted by assets under management. Results lagged behind the performance of the pension fund benchmarks slightly, due to the lower returns made on equity and bond investments, according to the survey report.
“A comparative analysis across asset classes suggests that the main contributors to the relative underperformance were CHF and non-CHF bond holdings – due to portfolio underweights, duration limits and interest rate hedging measures – and Swiss equity investments,” the report stated.
“Performance to the end of 2004 was driven by indirect real estate investments and equities, while alternative investments (hedge funds, private equity) posted the most disappointing performance.”
Another finding was that institutions “almost always” keep investment decision-making responsibility in-house, with external mandates restricted to execution of investment decisions. Specialist and core/satellite strategies were listed as the preferred investment styles while passive management is becoming more widely used.
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