A leading Swiss newspaper has exposed concern amongst the national fund community that major banks might be distorting pension industry analysis to promote their own services

The report in the Neue Zürcher Zeitung singles out banking giants UBS and Credit Suisse for criticism. Both have published 2010 pension fund barometers in the new year that report average annual yields on the optimistic side. The 2.68% average returns quoted by the UBS index and the 3.01% stated by Credit Suisse are comfortably beyond the 0.5% to 2% yields that most Swiss pension funds are reported to have gained in 2010.

Particular points of criticism were UBS's statistics on Swiss equity returns and the changing of Credit Suisse's headline average fund return figure. The 8.95% annual return that UBS Swiss equity mandates were quoted as averaging in the bank's 2010 Pensionskassen Barometer raised many eyebrows in the national pensions community, principally because the Alpine nation's blue-chip SMI index had in fact dropped by 1.68% in 2010 rather than growing close to 9%.

The bank explained to the Zurich-based newspaper that the surprising result was due to a method of equal-weighting shares in its mandate rather than using capital-weighting, effectively giving greater prominence to smaller investments in small and mid-caps equities. Small and mid-cap equities happened to substantially outperform blue-chip shares on the Zurich stock exchange in 2010.

Andreas Haueter, Chief Investment Officer of Swiss Post's €14 billion pension fund told Pension Funds Insider: "We are in complete agreement with the Neue Zürcher Zeitung article. This index has to be treated with great caution and is not a benchmark for us."

Credit Suisse's decision to release a preview of their latest quarterly pension index on 13 January headlining a different return figure from their full version on 24 January also provoked criticism. The concern in this case was that the bank might be rushing the release of their pension statistics in the name of competition and at the expense of accuracy. Credit Suisse initially reported a 2.93% annual average return for pension funds on 13 January, only to alter this to 3.01% on 24 January.

A lack of reliable performance data is reported to be a growing concern amongst Swiss pension managers as they contend with the pressure of trying to continue a strong history of consistently high pension returns. One industry insider told Pension Funds Insider that many funds would turn to indices of lesser known names to gauge their performance, such as Swisscanto, the asset managing branch of the country's regional Cantonal banks. Their 2010 index suggested a more modest 2% average annual yield for Swiss pension funds.

Both UBS and Credit Suisse were contacted by Pension Funds Insider  but declined to comment on the compilation of their pension fund indexes. Sources close to the banking community suggested, however, that funds were looking to place undue faith in indices that are intended to be indicative and not authoritative.

dbillingham@wilmington.co.uk