Zurich (awp) – Swiss pension funds went through a turbulent phase in 2022. The contrast is stark in the light of record investment returns in the 2021 financial year, according to an industry study by the consultancy in Complementa investment.
“The year 2022 contrasts sharply with the previous successful year,” Complementa analyst Ueli Sutter said at a press conference on Tuesday. Specifically, pension fund capital investments generated a negative return of 7.7% between January and August 2022. In 2021, the return was +8.3%.
In addition to this miserable performance, the average degree of coverage decreased to 105.1% compared to 115.3% at the end of 2021. During the year, the number of funds in an overdraft situation increased to approximately 8, 5%. Complementa estimates that pension institutions must currently obtain a return of at least 1.9% to maintain the degree of coverage at a stable level.
High pay in 2021
The working population has benefited from the good investment results in 2021, added Mr. Sutter. “Last year, employees benefited from a pension capital remuneration of 3.8%,” he explained. By comparison, the average compensation over the past 20 years was 2.4%.
The conversion rate, on the other hand, reached a new low, at 5.39%, down a tenth of a point compared to 2021, notes the study. “And we must expect further declines in the conversion rate in the coming years,” predicted Mr. Sutter.
Success of infrastructure investments
For these reasons, pension funds are reducing the share of fixed-rate investments such as bonds. At the end of 2021, less than a third of investments belonged to this category, a historic low, notes the analyst.
The capital released is essentially divided between real estate and alternative investments, particularly in infrastructure. In 2021, infrastructure was the most valued subcategory for the first time, Complementa finds.
For fund managers, the main reasons for integrating infrastructure investments are access to additional sources of return and diversification effects. For participants who do not invest in infrastructure, the lack of liquidity is the main reason for abandoning this asset class.
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