SWITZERLAND - Swiss pension funds must take on more risk if they are to meet projected returns, Swisscanto says.
The investment bank's annual study of 286 Swiss pension funds found the average target return stood at 4.7%, which was significantly higher than the projected return of 3.9%.
Swisscanto head of staff pension consulting Patrick Spuhler said fund requirements had increased markedly. While target returns have only changed slightly since the introduction of BVG law governing the mandatory set-up of workplace pension schemes in Switzerland, the interest rate level is considerably lower today, he added.
He said: "An increase of the target return through a portfolio with higher investment risks requires answering a series of critical questions beforehand. Among them are the following: Who is the risk taker? How high is the ability to manage risk or the potential for financial restructuring, as the case may be? How high is the willingness to take risks?
"But this must not mean that every risk should be avoided. This is an integral part of any portfolio, since the opportunity costs of avoiding it would be too high."
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