Home Alternative Investments Swiss scheme excludes commodities under ESG policy despite second-best return | News

Swiss scheme excludes commodities under ESG policy despite second-best return | News

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PKG Pensionskasse, the Swiss pension fund for small- and medium-sized firms, has excluded commodities from its pool of investments despite the asset class delivering second-best returns last year at 29.22%, according to the scheme’s sustainability and financial statements.

The pension fund returned 8.62% last year, with private equity posting the best result (41.41%), followed by commodities, Swiss equities (24.12%), hedged foreign equities (23.38%), and small cap foreign equities (19.74%), according to the financial statement.

The year-to-date performance is however negative at -7.9%, with assets under management reaching CHF9bn (€8.8bn) at the end of April and its funding ratio standing at 116.20% at the end of March.

In 2021 out of its 15 asset classes, excluding liquidity, six outperformed their benchmark, including Swiss bonds, Swiss equities, small and mid-cap Swiss equities, hedged commodities, insurance-linked securities and opportunistic investments.

Assets under management rose by 12.47% to CHF9.53bn year-on-year at the end of 2021, and its funding ratio increased to 123.20% from 115.60% in 2020.

PKG invests 25.30% of its assets in Swiss bonds, 4.30% in government bonds (hedged), 8.30% in corporate bonds (hedged), 1.70% in emerging market bonds, 5.70% in Swiss equities, 2.90% in small and mid-cap Swiss equities, 18.90% in foreign equities (hedged), 3.50% in small-cap foreign equities, 3% in emerging market equities and 1.40% in cash.

Among alternative investments the scheme invests 1.80% in private equity, 0.20% in currency futures, 1.60% in insurance-linked securities, 1.80% in commodities (hedged), 16.10% in Swiss real estate and 3.30% in foreign real estate (hedged).

Direct investments amount to 21.76% and investments via collective schemes to 78.24%.

The pension fund is, meanwhile, moving forward with its ESG investment policy, planning to switch to a sustainable benchmark for Swiss bonds, foreign equities, foreign small-cap equities, and emerging market equities, it said in its sustainability report for 2022.

The pension fund allocates assets to equities through collective investment schemes with the fund management company exercising voting rights. It had picked ESG benchmarks for selected equity investments last year.

PKG is also planning to review all asset management mandates with an eye on sustainability, and it is currently examining how to disclose fund managers’ votes on its website.

The scheme invests 77.02% of its assets by mandating asset managers that are members of the Swiss Sustainable Finance association, and 92.06% by asset managers that have signed the United Nations’ Principles for Responsible Investment (UN PRI), the sustainability report said.

A large majority of asset managers (96.30%) integrate sustainability aspects into investment activities. The pension fund applies exclusion lists, for example the list issued by the Swiss association for responsible investments SVVK-ASIR, the report added.

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