SWITZERLAND - Swiss pension funds returned 13% in 2005 as they achieved their strongest year since 2000, according to the Swiss pension fund association (ASIP).
Performance was mainly aided by strong international equity markets and US dollar strength, while pension funds’ returns for all asset categories were positive for the year.
On the local front, only a quarter of the portfolio managers were able to outperform their benchmark for Swiss equities (35.6%) and bonds (3.2%).
By contrast, more than 50% of managers investing in foreign equities and foreign bonds were able to beat their respective broad market indexes.
According to ASIP, the range of results between the best and worst portfolio managers were 5.9% for Swiss equities, 7.9% for global equities, 7.8% for global bonds and 2.7% for Swiss bonds. “These results show that the professional and independent selection of external portfolio managers is becoming a significant issue for pension funds,” said ASIP.
The year’s overall return was in stark contrast to 2004, when the average Swiss pension fund performance only 4.2%.
ASIP said the positive results allowed funds to contribute to their reserves, pay down their liabilities and where available to allow the pensioners to participate in the good performance. “The positive results show that the majority of pension fund directors are realising their responsibility in the area of investment management,” ASIP said.
But despite the good results, ASIP warned the specific situation of each pension fund - including risk capability, provisions, and reserves - should be taken into account. “This includes such determinants as the technical funding rate and the pension conversion rate, whose definition should be understandable, transparent, and financially as well as technically correct.”
ASIP also stressed that expectations of future investment returns should be reviewed objectively and realistically, including a due regard to the level of fluctuation reserves and other required provisions.
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