The Swiss Federal Pension Fund PUBLICA, Bern, posted a -9.6% net investment return in 2022 driven by negative returns of bonds and equities and adjusted its strategic asset allocation by reducing bonds and increasing real estate and listed equity allocations, it said Thursday.
The new strategic asset allocation is being implemented in stages, and it will take up to four years for some of the more illiquid asset classes to be invested in, PUBLICA said.
A spokeswoman confirmed that the fund's motivation was to increase its expected investment return and diversification.
Executives at PUBLICA, which had 39.1 billion Swiss francs ($42.3 billion) in assets as of Dec. 31, increased its real estate and listed equity investments by expanding its developed market equity allocation to 20% in 2022 from 16% set in 2018.
Also, Swiss equity allocation was increased to 6% from 3%.
Swiss real estate increased to 9% from 7% of assets, while international real estate was increased to 9% from 6% of assets.
Precious metals allocation was increased to 3% from 2%.
At the same time PUBLICA introduced infrastructure at 3% and reduced emerging market equities to 6% from 8% of assets.
The changes meant that executives reduced Swiss bond allocation to 12% in 2022 from 14% set in 2018. The pension fund's allocation to private debt was decreased to 9% from 10%.
Emerging markets bonds were reduced from 8% to 4% of assets, while corporate bonds denominated in foreign-currencies declined to 5% from 9%.
PUBLICA also reduced government bonds with inflation protection to 3% from 6%.
The fund's allocation to developed market bonds excluding Switzerland remained at 8%, while its allocation to money market funds remained at 3%.
In its first report on responsible investment published for 2022, PUBLICA said it calculated for the first time the Scope 3 emissions of its portfolio companies, which are emissions of their supply chains. It also excluded coal producers from its investments.