SWITZERLAND - The Pensionskasse des Bundes (PKB), has dumped three quarters of its external active equity managers.
“The main reason was performance, but another very important reason was too low tracking error,” said Felix Senn, pension fund manager.
“If the tracking error is low, I can do that passively, and then the cost is also a reason.” As a result the Swiss Treasury, which is responsible for the administration of the Sfr28bn public authority pension fund, will take over the management of the equity portfolio.
Ninety seven percent of Swiss equity holdings and 80% of the international have been passively managed since the third quarter of 2002.
Total returns in 2002 came in at -6.95% which was below the government’s minimum interest rate guarantee of 4% at the time. This has since been cut to 3.25%, and risks being cut to 2% this year, largely due to the fall in Swiss sovereign bond yields.
In March 2003, overall the fund was invested 11.1% in Swiss equities and 11.1% in international equities, falling short of the target allocation set in 1999, at 16.5% to Swiss and 19% to international equities.
A further change has been the migration of all Bundespensionskasse’s members into the new fund called Publica.
The transfer was completed in June 1, 2003, however the Treasury maintains control over the funds’ Sfr28bn worth of assets.
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