After a solid performance in January, Swiss pension funds posted negative returns in February. Traditional asset classes in particular posted a negative performance. What do the experts recommend?

The pension funds tracked by UBS posted an average performance after fees of -0.80% in February 2023. The Credit Suisse Swiss Pension Fund Index also fell by 1.41 points or 0.76% in February. In January, UBS reported a positive performance of +2.65% for pension fund investments, while Credit Suisse reported +2.76%.

Traditional asset classes performed negatively

Credit Suisse sees bonds as the main reason for the negative performance in February in  (-0.44%). Foreign equities contributed -0.24% and Swiss equities -0.11%. Liquidity (-0.06%) also weighed on the monthly result, mainly due to currency hedging. Only real estate (+0.10%) posted a slightly positive performance.

UBS also saw corrections in global equities, down 1.28%, and in Swiss equities, down 0.79%. Foreign currency bonds fell by 1.21% and and Swiss franc bonds  by 1.36%. In contrast, alternative investments ended the month in positive territory. According to UBS, real estate posted a performance of 0.18%, private equity and infrastructure rose by 0.58% and hedge funds gained +2.10%.

Interest rate fears weighed on the markets

After an optimistic start to the year, markets lost momentum in February. The main concern was that stubbornly high US inflationand strong employment data would force the Federal Reserve to keep monetary tight for longer, according to UBS economists Jackie Bauer and James Mazeau. The possibility of higher interest rates and a longer interest rate cycle has contributed to a decline in US equities and a strengthening of the US dollar, they said. In addition, the fourth-quarter reporting season in the US showed a year-on-year decline in earnings, they said.

Effects of monetary tightening still likely to become apparent

So what can investors expect in the coming months? "Much of the impact of last year's monetary tightening has yet to be felt and is likely to be reflected in the coming months ahead," say economists.

Interest rates likely to rise moderately in Europe

What do investment experts say about this development? "Europe has moved quickly to become less dependent on Russian energy, and inflation has fallen. However, it will not return to previous levels," say investment experts at Columbia Threadneedle Investments, for example. They add: "We don't expect the European Central Bank to raise interest rates as much as the market expects, and equity prices still have upside potential."

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