Swiss pensions are facing a race to the bottom. While the predominant investment approaches have fared comparatively well in the past, with a focus on obligations, equities and real estate, the future doesn’t look quite as positive. With the current average allocation, a typical Swiss fund can expect returns around the 2% mark over the next years. However, to be able to sustain current conversion rates, returns around 3% would be necessary.
The base allocation for most Swiss pension funds averages around 30-35% for fixed income, 33% for equities and 20-25% for real estate (according to Swisscanto PK study 2021). With an additional average 5% in liquidity, the actual average allocation to alternatives has stood below 10% over the past ten years.
In our short paper “The Case for Private Markets”, we summarize how private markets can add value for Swiss pension funds and where we see the biggest potential.