Swiss pension funds are cutting back their bond exposure to shift into real assets and have broadly abandoned securities lending, according to findings of a Swisscanto annual survey.
The Swisscanto survey also revealed that the financial crisis had forced schemes to "rethink" their approach to securities lending, with many realizing that the "supposedly risk-free and temporary lending of securities" posed "hitherto unconsidered risks".
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The survey conducted by Swisscanto looked at 343 pension providers in Switzerland.
As of the end of 2012, Swiss pension funds invested 27.6% of a total CHF481 billion (US$498 billion) in equities, according to the survey. This is the biggest allocation to stocks amongst Swiss pension funds since 2007 and is a marked increase from the 26% invested in equities at the end of 2011.
Allocation to bonds fell to 35.8% from 37.2% in the previous year – the lowest allocation Swiss pension funds have had to the low-yielding asset class in over eight years.
Following the change in allocation, the average return of the in 2012 was 7.17%. This was a marked improvement from last year where a majority (86%) saw returns in a range between -2.5% and 2.5%.
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By GlobalDataElsewhere their allocation was changed little from the previous report with real estate making up 20.3% of overall investments, alternative assets 5.5% and cash at 7.4%.
The previous survey revealed that a majority of pension funds missed required yield targets and were unable to match liabilities the central bank moved to defend its currency through easing measures which, according to CIO Peter Bänziger, spurred inflationary risk and ‘dictated returns’.
