Swiss equities, bonds and real estate investments showed good performance in 2010

Equities and real estate yielded positive returns in December. CHF-bonds, on the other hand, were slightly negative, while foreign currency bonds and hedge funds were well in the red. Over the whole year, Swiss investments – bonds, equities and, for the greater part, real estate – proved extremely lucrative. Foreign currency bonds and hedge funds, however, chalked up losses, often because of the failure to hedge foreign currency exposure against the increasingly strong Swiss franc. According to UBS, this underscores the need for systematic foreign currency hedging, especially for bonds.

Large pension funds achieved higher returns than smaller institutions

Total pension fund performance since 2006 equals 6.8% (see graph). Larger pension funds performed better on average than medium and smaller pension institutions. Their cumulative performance since 2006 reached 8.7% compared with 6.6% for medium-sized pension funds and 6% for smaller pension funds.

Positive performance expected in 2011

UBS reports that the fears of a global recession, still widespread a few months ago, have now faded, making way for a good performance of higher-risk investments such as equities, commodities and corporate bonds. Investors will have to select individual investments more carefully than in 2010 and must be prepared to reallocate when new opportunities and risks appear.

UBS expects highly volatile bond markets in 2011. Caution is mandatory in selecting individual investments. UBS also advises investors to reduce their exposure in state bonds with high ratings.