Swiss pension fund allocations to alternative assets surpass 10% for the first time

Swiss pension fund allocations are on the rise. A study by European consultancy Complementa finds that Swiss pension funds have taken to alternative assets in a big way. The primary impetus for this trend appears to be the current low-interest-rate environment.

Low yields on bonds have pushed the funds into the arms of assets such as infrastructure, private debt, and insurance-linked securities.

Overall allocations to alternatives surged past 10% for the first time in history. Allocations to real estate were their highest level in two decades.

As of June 2019, the European alternatives industry hit € 1.62 trillion in assets.

Solid funding ratios

In an irony of sorts, while investors put a lot of money into Swiss pension funds, retirees faced significant cuts to their benefits. Pensions were forced to take this step due to low-interest rates.

The largest Swiss pension funds boast of funding ratios near about 100%. In recent times, funding stands at an average of 109.1%, according to Complementa.

Dim outlook for returns

Complementa forecasts investment returns of 2.1% on average during 2019. This outlook assumes a substantial near-term fall considering that returns averaged a solid 7.9% over the first eight months of the year.

Finally, Complementa’s opinion is in line with a recent Preqin survey that found investors believe equity markets are at the top and likely to correct.