Swiss pension funds rebound in 2023, benefiting from robust financial markets and reversing the previous year’s negative performance.

Swiss pensions in 2023 marked a year of significant recovery. Which saw a remarkable turnaround from the previous year’s downturn. According to the latest Swisscanto Pension Fund Monitor, the pension funds capitalized on the robust financial markets, particularly in the final quarter, substantially bolstered by central bank actions.

The funds recorded an impressive average return of 6.2% in 2023. This performance was notably highlighted in the fourth quarter, contributing to an increase of about 2.5%. Starkly contrasts with 2022, where the pension funds experienced a concerning negative performance of around -12%.

A key indicator of this financial rebound is the improvement in coverage ratios. Private-law pension funds saw their ratios climb to 114.9%, up from 105.6% in the previous year and 112.6% in the last quarter. This recovery effectively reverses the slight dip experienced in the third quarter, reinstating an upward trajectory. The figures are drawing close to the highest values recorded over the past decade.

Nearly half (49.1%) of private pension funds now boast a coverage ratio exceeding 115%. The last quarter’s financial market surge particularly favored private-law funds, while the improvement in public-law, fully capitalized funds was somewhat more restrained. Nevertheless, the proportion of funds with a coverage ratio of over 115% increased from 13.5% in the third quarter to 16.2% at the end of 2023.

Regarding asset classes, global equities led the charge with a year-on-year rise of 11.4%. Swiss equities and Swiss franc bonds also delivered strong performances, with gains of 6.1% and 7.4%, respectively. Swiss real estate, too, showed a healthy increase of 3.2%.

However, 2023 did not favor all asset classes equally. Commodities, for instance, registered a significant downturn with a 16.3% drop in performance. Global bonds without currency hedging declined by 3.9%, though hedged bonds saw a modest increase of 2.5%. Hedge funds, on the other hand, experienced a slight decrease of 1.0%.

These figures reflect the dynamic nature of financial markets and the impact of broader economic forces on pension fund performance. Following a challenging previous year, the 2023 upswing in Swiss pension funds’ fortunes demonstrates the resilience and adaptability of these financial institutions in the face of global economic fluctuations.

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