Swiss pension funds realised a performance of 3.7% on the overall portfolio in 2010. In the second half of the year, performance averaged 3.5%. Currency management was decisive in these results.

According to ASIP, the association of Swiss pension institutions, the strong Swiss franc was at the heart of asset managers' concerns last year. The published data shows that pension funds which actively managed their foreign exchange risks realised above average returns last year.

Managing Swiss bond portfolios was a challenge

According to ASIP, interest rate trends and the growing demand for real estate led to an average performance of 6% on the “indirect Swiss real estate” and “indirect foreign real estate” portfolio categories. “Unhedged foreign currency bonds”, on the other hand, chalked up an average performance of -4.8%. “Swiss bonds” yielded 3.3%. The standard SBI AAA-BBB benchmark showed returns of 3.7% over the same period. This comparison shows that managing Swiss bond portfolios actively is a real challenge.  In the last five years, compared with an average return of 2.8%, this investment class has been the prime source of earnings for participating pension funds.

Mid- and small caps perform best

The performance realised on domestic equities in 2010 is quite revealing. The pension funds participating in the survey realised an average positive performance of 3.8% on their "Swiss equities" portfolios. Heavily capitalised shares, which actually account for about 80% of the Swiss equities market, realised a mere 1.2% return according to the SMI. The higher average performance in the "Swiss equities" investment category was largely due to the portfolios which benefited from the high (20% and more) returns chalked up by the mid and small caps. (SWX SPI Mid Cap 20.6% / SWX SPI Small Cap 22%).

Portfolios containing 33% equities and 44% bonds

In the second half of 2010, there were no significant shifts in asset allocation. The slight changes in asset allocation were generally due to market movements rather than the result of active decision-making. At the end of 2010, pension fund portfolios had an equities content of 28.2% on average compared with an average bond content of 43.6%.

According to ASIP, the comparative study is the largest independent performance survey conducted in Switzerland, and is based on a total of CHF 167 billion in pension assets, 67 respondent pension funds and over 650 portfolios. It was conducted by the consultant firm Towers Watson.