Swiss Pension Fund Publica Lost 9.6% in 2022

Swiss pension fund Publica reported a 9.6% loss in 2022, which the pension fund attributed mainly to a weak performance by its equity and bond asset classes. Last year, the pension fund reported an investment return of 4.43%. It ended 2022 with total assets of approximately 44 billion Swiss francs ($47.8 billion).

“Massive upheaval on the global financial markets depressed returns on Publica’s investments,” the pension fund’s release stated.

Despite the loss, the performance exceeded its benchmark, which posted a loss of 10.09%. The pension fund’s release also stated that, due to rising interest rates, “a return to much higher performance can be expected over the long term.” Publica also revealed that it is now beginning to implement, on a staggered basis, changes to its strategic asset allocation that it made in June 2022.

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Publica, which is comprised of 18 pension plans, has closed plans whose participants are entirely made up of retired pension recipients, while the open plans contain both pension recipients and active members who are still working. The closed pension plans, which have a 10% allocation to equities, reported an 8.0% loss for the year, while the open pension plans, which have an approximately 25% allocation to equities, recorded a 9.7% loss. The consolidated funded ratio across all pension plans is estimated at 96.7%.

Bonds were the biggest burden on the portfolio, losing approximately 12% overall and making a negative contribution of 6.3 percentage points to the performance, while equities contributed a loss of 4.1 percentage points. The six main geographical regions all produced losses in 2022, led by Europe ex-Switzerland), which lost 11% for the year, followed by an 8% loss from investments in Japan and a 6% loss from Pacific (excluding Japan) investments. Realized equity returns ranged between losses of 16% and 17%.

The pension fund’s real estate investments provided one of the few bright spots for the portfolio, with foreign real estate funds returning 14% on a currency-hedged basis, while directly held Swiss real estate returned 3.9% for the year.

Publica said that an analysis it conducted in 2021 indicated that inflation would very likely be higher over the next decade than the preceding one. As a result, the fund’s board decided to reduce its weighting of bonds in favor of higher weightings for real assets and listed equities due to real assets’ tendency to outperform nominal assets during periods of higher inflation.

“The expected return over the medium to long term is thus higher than with the former strategic asset allocation,” the pension fund said.