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ASIP - Schweizerischer Pensionskassenverband

ASIP Performance Comparison: Average annual return of 1.8% for pension funds participating in the ASIP performance comparison

Ein Dokument

Zurich (ots)

- Indication: The performance of Swiss pension funds in 2007 can
      be downloaded free of charge under: 
      http://www.presseportal.ch/de/pm/100005511/?langid=2 -
The performance comparison carried out on behalf of
the Swiss pension fund society (ASIP) by the consulting firm Watson
Wyatt shows a median return of 1.8% on the aggregate portfolio(1) of
the participating pension funds for 2007.
(1) The aggregate portfolio contains equities, bonds, indirect and
direct property as well as hedge funds. Debtors and accrued income
are not included. Median return means that half of the participants
have achieved a higher return and the other half have achieved a
lower return. The performance of individual pension funds can vary
from this average value, as it depends significantly on each fund's
allocation to different investment categories.)
After a very positive first half of 2007 (median performance 9.9%)
the investments of the participating pension funds suffered due to
the significant corrections seen primarily in the equity markets of
industrialised countries. The equity markets saw very different
returns in the second half of the year. For example European equities
achieved a median return of -6.1%, while emerging markets equities
returned +7.8%. The latter contributed very positively to the year's
results with a median return of +27.4%. A positive contribution was
made by bonds in general which tended to profit from reducing
interest rates in the second half of the year. In spite of this,
Swiss bonds were not able to completely recover from the losses
suffered in the first two quarters and ended the year with a slightly
negative return.
The universe of Swiss real estate showed a median return of +5.6%
for 2007. In the short term, hedge funds did not significantly help
to support portfolio returns, particularly as they suffered similar
losses to certain equity markets in the second half of the year.
However, over the year as a whole they generally made a small
positive contribution to performance (median return 2007: 1.1%).
Results for the main investment categories and total portfolio for
2007
Investment category    Lowest returns      Median    Highest returns 
                       (5% of                        (5% of 
                       participants                  participants
                       achieved a                    achieved a
                       maximum of ...%)              minimum of...%)
Swiss equities           - 3.1%           - 0.3%        + 3.7%
Foreign equities         - 1.2%           + 3.2%        + 7.7%
Swiss bonds              - 1.3%           - 0.4%        + 1.9%
Foreign currency bonds   + 0.5%           + 2.3%        + 4.2%
Total portfolio          - 0.6%           + 1.8%        + 4.0%
Asset allocation
The analysis of the results shows the significance of the asset
strategy adopted by the pension fund management. The investment
categories of equities and bonds together constitute the majority of
the participating pension funds' investments with approximately 79%
of the total assets. The equity weighting was reduced following the
stock market corrections and is now approximately 38% of total
assets, while bonds account for approximately 41%. During the year a
number of participants integrated their real estate into the
comparison, with the result that the average percentage is now almost
9%, showing that real estate is becoming more and more
representative. On the whole we observe a tendency to reduce domestic
investments in favour of foreign and alternative investments. The
average allocation of all portfolios at the end of the year was as
follows:
Investment category                   Average allocation
Swiss bonds                                  24.1%
Foreign currency bonds                       16.7%
Swiss equities                               12.6%
Foreign equities                             25.2%
Swiss real estate                             8.9%
Hedge funds                                   3.5%
Liquidity                                     4.5%
Other                                         5.1%
Conclusion
The past year has once again shown the importance of
diversification as well as a long-term investment horizon. With
diversification it is not only important to take into account various
investment categories with different features, but equally various
geographical regions which could possibly be in different economic
cycles.
If less satisfactory returns are achieved in the short term, the
long-term investment horizon of a pension fund should always be
considered. The average returns over 3 and 5 years amount to 6.6% and
6.9% p.a. respectively for the participating pension funds. However,
this number depends significantly on the composition of the portfolio
and can under no circumstances be generalised.
Diversification remains the most important issue in the asset
management of a pension fund, because it creates security almost
without additional costs. What must be clearly determined, however,
is that the selected investment structure must always correspond to
the risks the pension fund is able to cope with. The overall average
performance of 1.8% is a median value. Looking at 90% of the
participating pension institutions, to eliminate outliers, the total
returns for 2007 were between -0.6 and 4%. This spread is not
surprising given the very diverse allocations of the funds. For
example at the end of the year, the allocation to CHF bonds was
between under 10% and almost 45%. For foreign equities the allocation
was between 15% and over 45%, depending on the pension fund.
These results show that ultimately the investment strategy agreed
by the pension fund management - taking into account the risk
capability - is always key. The results of the above comparison
should aid the management in analysing their investment policy.
In addition it should be noted that, in the interest of the
occupational pensions as a whole and in particular the insured
members, the standard benchmarks for occupational pensions (e.g.
minimum interest rate) should be defined in such a way, that the
pension funds have the chance to realise a surplus.
The performance comparison is the largest independent comparison
in Switzerland with total assets of 176 billion CHF, 74 pension funds
and over 650 compiled portfolios.

Contact:

ASIP - Swiss society of pension funds
Hanspeter Konrad, Director
Kreuzstrasse 26
8008 Zurich
Tel.: +41/43/243'74'15/16

Watson Wyatt AG (technical implementation)
Marc Blaser
Seefeldstrasse 214
P.O. Box, 8034 Zurich
Tel.: +41/43/488'44'00