Swiss pension funds cut bond exposure to ramp up alternatives

first_imgThe CHF1bn (€820m) Pensionskasse for Swiss fashion company Manor has cut its exposure to bonds from 30% to 15% to free up money for higher-yielding investments.Martin Roth, chief executive at the scheme, which has a target return of 3%, told delegates at the 2014 Swiss Pensions Conference in Rüschlikon that the step had been necessary.“I do not think, over the next 10 years, we will see the same returns from bonds as we have over the last 20,” he said.Instead, the pension fund has allocated “very strongly” to alternative investments such as infrastructure, hedge funds and convertibles. On the same panel at the conference, Stefan Köhler, senior portfolio manager at Swiss pharmaceutical company Hoffmann-La Roche, reported that the company’s CHF7bn Pensionskasse was “managing its bond exposure more via the duration”, which is approximately two years lower than that of the average Swiss Pensionskasse.Heinrich Flückiger, a pensions expert at Swisscanto, pointed to a growing trend of lowering duration in bond portfolios in Switzerland, with pension funds aiming to increase duration again once interest rates go up.“However, there is interesting research that, over one year, the downside risk of almost all bonds is much greater than the upside return opportunities,” Flückiger said, adding that some Pensionskassen were therefore opting for equities instead.He said there was an unprecedented level of interest in fundamental indices, with some of his clients shifting half of their passive portfolios into investments based on fundamental or rule-based indices.“Three years ago, nobody was interested in alternative indices,” he said.At La Roche, Köhler also still believes in return from equities and has increased the fund’s equity exposure by 700 basis points to 37%.On the other hand, Stefan Beiner, head of asset management and deputy director at the CHF36bn Publica fund, decided to sell off some equities at the beginning of the year, as he was unsure the asset class could return as much as it did over the previous two years, when Publica increased its exposure to equities.Instead, Publica is considering to go into private debt, infrastructure debt and direct lending, although “not necessarily in Switzerland”.Beiner stressed, however, that the fund was still “at the beginning” of the assessment process of whether these investments would be worth the effort and risk.Last year, the Roche pension fund made two direct investments in Swiss infrastructure using in-house legal expertise, but Köhler pointed out that this was the limit.He said he was “disappointed” by the range of infrastructure products, most of which are structured as private equity investments, with a planned exit after 10 years.“But why should I sell after 10 years only to get back money I immediately want to reinvest?” he asked.”I am not talking about buy and hold, but buy and manage would be nice.”Roche and Manor have joined forces with other Swiss Pensionskassen to pool assets and resources for infrastructure investments.All three panellists argued that the debt situation of Swiss regional and local authorities was too good to really be in need for external infrastructure financing.However, the Swiss government is thinking to establish a so-called Zukunftsfonds, in which venture capital is to be sourced from domestic institutional investors.All three pension fund representatives said they were against any obligation to pay into this fund, with Köhler arguing that venture capital investments only worked when there were follow-up investors after the seed money had gone.“We are no development bank,” he said. “That’s what other investors are for.”last_img read more

Mortgage Rates See First Increase in 2012

first_img Share January 26, 2012 416 Views in Data, Origination, Secondary Market, Servicing Adjustable-Rate Mortgage Agents & Brokers Bankrate Debt Crisis European Union Federal Reserve Fixed-Rate Mortgage Freddie Mac Housing Affordability Investment Investors Lenders & Servicers Mortgage Rates Processing Service Providers Treasury Yields 2012-01-26 Ryan Schuettecenter_img Mortgage Rates See First Increase in 2012 Interest rates for mortgage loans went up for the first time in several months this week but remain near historic lows.[IMAGE]Finance Web site “”Bankrate.com””:http://www.bankrate.com/ and mortgage giant “”Freddie Mac””:http://www.freddiemac.com/ reported modest increases for mortgage rates across the board.Freddie Mac found the 30-year fixed-rate mortgage rising from an all-time low of 3.88 percent last week to 3.98 percent this week, far below 4.80 percent seen for the loan at the same [COLUMN_BREAK]time last year. Bankrate.com posted a similar increase from 4.18 percent last week to 4.25 percent this week.The finance Web site said that the 15-year loan rose from 3.39 percent last week to 3.45 percent, while Freddie posted 3.24 percent for the product this week, up from 3.17 percent.Bankrate.com said in a statement that the increase for the 30-year loan signaled a two-month break from steady declines for mortgage rates seen over the last several months.Debt crises in eurozone nations helped drive investors to U.S. Treasury debt in recent months, widening Treasury yields and keeping mortgage rates at all-time lows.The Web site added that the “”Federal Reserve’s””:http://www.federalreserve.gov/ “”decision””:https://themreport.com/articles/fomc-to-maintain-low-interest-rates-until-2014-2012-01-25 Wednesday to keep interest rates between 0 percent and .25 percent “”is likely to unwind the modest increase of the past week.””For Freddie, 5-year adjustable-rate mortgages (ARMs) hovered around 2.85 percent this week, up from 2.82 percent last week, while rates for the 1-year ARM stayed the same at 2.74 percent.Bankrate.com found rates for 5-year and 1-year ARMs ticking up from 3.06 percent last week to 3.09 percent this week.last_img read more