Daniel Thomann, head of pension fund consulting at Aon Hewitt, said: "Swiss pension funds – which had experienced losses after the financial turmoil in 2008 – have traditionally been less exposed to equity than some of their European counterparts. "However, they have been significantly more exposed to currency risks, and today, most of them are severely hit by the strength of the Swiss franc, at least in the short term." Thomann said most of the investments in the equity market had to be made outside Switzerland, where the market is too concentrated for local investors. As a result, Swiss pension funds have invested a large part of their equity portfolio in the euro-zone and the US, which has exposed them to exchange rate risk.
Michael Valentine, investment consultant at Mercer, said: "Since the beginning of the year, the Swiss franc has strengthened considerably against the US dollar and the euro. "Pension funds that did not hedge their portfolios against currency risks have therefore suffered significant losses." He added: "Some of them may now be tempted to consider reducing their investment universe – for example, by moving back to the local equity market and moving away from hedge funds – but this would be counter-productive, as it would reduce the overall level of diversification."Valentine said Swiss pension funds might take the opportunity at their next board meetings to review their positions, but, on the whole, he expects them to "stick with their long-term investment strategies".