Swiss pension funds are averaging negative returns for the first half of 2011, claims the country's pension fund organisation ASIP

ASIP's latest performance comparison shows a 0.2% drop in average portfolios between January and June 2011, although average returns dating back 12 months to June 2010 are 3.1%.

The increasing strength of the Swiss Franc, which has attracted a flood of investment due to its reputation as a safe haven, was cited as a reason for the losses. The Swiss Franc has reached record strengths of 1.1352 Francs to the Euro, and ASIP now urges Swiss pension funds to make currency management a high priority.

All 63 pension funds taking part in the study suffered losses in overseas equities, with the average drop being 5.4%, while the value of overseas bonds declined by 3.2% on average.

General market uncertainty was also blamed for the poor results, while the Japanese earthquake and Eurozone sovereign debt crises were blamed for creating volatility.

The comparison of 63 pension funds with combined assets of 187 billion Swiss Francs reveals that alternative investments have been gaining in popularity over the first six months of the year. Investments in real estate increased to 13.1% from 11.5% on average, while average equity holdings dropped from 28.2% to 27.8%.

Bonds remain the most popular asset for Swiss funds, with a 42.2% holding on average, down from 43.6%.   

Hanspeter Konrad, ASIP's director, told Pension Funds Insider that "the uncertainty in the markets is clear after the heavy market collapses of the past weeks and the downgrading of the USA, meaning fluctuations are to be expected in the near future. Even a stock market crash can't be ruled out."

He continued: "Whether the recent losses on the markets will have negative long-term consequences on our pension funds remains to be seen, however. Recent market turmoil has undoubtedly affected pension funds' funding levels. It is wrong, however, to speculate at this point about the need for possible deficit recovery measures."

First published 18.08.2011

dbillingham@wilmington.co.uk