Swiss pension fund performance

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The Swiss retirement system is based on a three pillar system. Pillar one consists of compulsory Old age and Survivors’ Insurance (AHV). Pillar two consists of a compulsory occupational pension (pension fund). Pillar two investments are managed by pension funds and investment foundations. Investment foundations are offered by banks and insurance companies. The third pillar is a voluntary private pension [1]

Performance studies

Ammann and Zingg (2008) examine the performance of 73 Swiss pension funds and 13 investment foundations, holding CHF 200 billion,[note 1] and representing 20% - 25% of Swiss pension assets. The study examines returns over the 1996 - 2006 period. While pension asset allocations are constrained by Swiss law, pension funds can receive exemptions by subscribing to a prudent investor rule. Approximately 80% of Swiss pensions are exempted from the rule.[note 2]


Swiss investment foundation costs are tabulated below:

Swiss investment foundation plan costs (1996 - 2006) [2]
Asset class Average Range
Domestic bonds 0.32% 0.16% - 0.50%
International bonds 0.46% 0.17% - 0.68%
Domestic equities 0.61% 0.29% - 1.13%
International equities 0.75% 0.07% - 1.12%


Net returns for pension funds and investment foundations are tabulated in the tables below. Over this period pension fund and investment foundation returns did not exceed index returns.

Net Swiss pension fund returns (1996 - 2006) [2]
Asset class Pension funds Investment foundations Index
Domestic bonds 3.02% 3.69% 3.69%
International bonds 5.36% 5.25% 5.77%
Domestic equities 8.72% 9.25% 9.86%
International equities 6.04% 6.49% 8.05%

Factor regressions

Factor regressions supply the following returns data. Domestic and international bonds returns are analyzed using a four-factor performance measurement model that includes a bond and a stock market index as well as two factors representing term and default risk. An additional exchange rate factor is added for international bonds. Stock returns are analyzed using the Fama-French three factor model. An additional exchange rate factor is added for international stocks.

Net Swiss pension fund factor returns (1996 - 2006) [2]
Domestic bonds International bonds Domestic stock International stock
Pension funds -0.290% 0.395% -1.155% -1.715%
Investment foundations -0.264% -0.058% -0.321% -1.043%

The analysis shows that pension fund managers only showed evidence of skill in security selection and timing in international bond investments. Ammann and Zingg (2008) conclude:

Although we find only little evidence for superior performance, there are outperforming pension funds and investment foundations in each of the four asset classes. However, we find no evidence of persistence in the performance of pension funds and investment foundations. Thus, pension fund trustees seem not to be able to select asset managers that consistently outperform the benchmark.


  1. CHF is the International Organization for Standardization (ISO) currency code for the Swiss franc.
  2. Swiss pension funds face limitations on their investments in equities, bonds, mortgages and real estate unless they are granted an exception. The currently imposed limits include:
    • Overall limit on equities of 50% including domestic and international equities, with sublimits of 30% on domestic equities and 25% on international equities;
    • Limits on bonds include a 20% limit on foreign currency bonds and a 30% limit on foreign CHF bonds;
    • Domestic real estate is subject to a 50% limit and mortgages are limited to 75%;
    • The total share of foreign currency investments may not exceed 30%;
    • The combined limit on equities and real estate is 70%.


  1. What can you do to manage your retirement provision?,, viewed 31 January 2014
  2. 2.0 2.1 2.2 Ammann, Manuel and Zingg, Andreas, "Investment Performance of Swiss Pension Funds and Investment Foundations" (January 2008). Available at SSRN.