Suva achieved a pleasing overall performance of 4.1 per cent in 2016 despite interest rates being at historic lows. Real estate, bonds, shares, gold and commodities made particularly positive contributions to the result. The SNB’s negative interest rates resulted in negative earnings from money market investments and high hedging costs for foreign currencies.
Suva’s fixed assets increased from CHF 46.4 billion to CHF 48.0 billion in financial year 2016, while the financial coverage ratio rose from 134 per cent to around 136 per cent, meaning Suva remains very soundly financed.
The investment strategy is based on longevity and broad diversification. It has a balanced investment portfolio. About half of the assets are invested in variable- or fixed-interest securities, with 31.5 per cent invested in shares, 12.5 per cent in real estate and the remainder in capability-based investments (non-traditional investments) and commodities. With this strategy, Suva achieves adequate return on the long-term average. Low-risk, fixed-interest capital investments alone would not meet the return requirements.
To compensate for significant fluctuations in value on capital investments, in good years Suva increases fluctuation reserves. In bad years it releases them again.
the distribution is based on risk premiums. The share ratio also includes private equity and equity-hedged portfolios, for example.
Asset classes have been grouped according to risk premiums as part of the new investment strategy in force since 1 January 2016. This approach allows alternative investments to be compared with traditional investments more easily and used in an even more targeted way.
The «Interest» risk premium includes bonds and loans with high credit ratings.
«Loans» covers all portfolios that entail a credit risk premium, i.e. compensation for assuming default risks. This includes syndicated loans, high-yield bonds and emerging market bonds. The «Private debt» and «Credit-hedged» portfolios previously managed under «Alternative investments» are now also included in this category.
The «Shares» risk premium also includes the «Private equity» and «Equity-hedged» portfolios in addition to the traditional share portfolios.
The «Capability-based investments» category focuses on the manager’s skills rather than skimming off an economic risk premium. It includes the «Global macro/CTA» and «Relative value» non-traditional investments.
Three things make this investment strategy possible:
Suva’s investment strategy can best be compared to that of a pension fund. Thanks to its balanced investment portfolio, Suva is able to survive even the most difficult times. Since 1918, a portfolio with a comparable distribution of assets would have achieved an annual yield of 5.6 %. The realised performance since 2000 exceeds similar pension fund indices, e.g. the BVG-25-Index and the CS Pension Fund Index.
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