Swiss Pension Fund Mulls Foray Into Swaps Market

  • 05 May 2003
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Pensionskasse Post, the pension fund of Swiss Post in Bern, is considering using interest rate derivatives for the first time as an alternative to cash bonds. Andres Haueter, head of asset management at the CHF10 billion (USD7.39 billion) fund, said since most of its fixed income investments are in Swiss bonds, which are illiquid, the fund is looking at the potential of investing in synthetic bonds structured using interest rate swaps, especially as its Swiss franc assets are growing.

For example, the fund could deposit Swiss francs with a bank to receive a three-month deposit rate and simultaneously enter a Swiss receiver swap--in which it receives fixed and pays a three-month floating leg funded by the bank deposit, he explained. Haueter was not sure what notional size such trades likely would be because he has not yet spoken to potential counterparties about the feasibility of derivatives strategies.

Pensionskasse Post plans to speak to firms which are large players in Swiss bonds and interest rate swaps. The fund will look for a bank with a high credit rating to execute such a swap because the deposits could potentially be at the same institution. "In that case the rating would be quite important," Haueter said.

The fund had not decided if it would hire an external asset manager to implement this strategy or if it is something it would do internally. This decision would come from the executive board of the fund, Haueter noted. Additionally Pensionskasse Post is considering investing in foreign-currency denominated bonds and using forwards to hedge currency exposure.

Separately, it is also considering investing in hedge funds, although Haueter said it was too early to decide if it would invest in them directly or through structured products. He added that the fund is likely to make a decision by year end.

  • 05 May 2003

All International Bonds

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4 Bank of America Merrill Lynch 248,459.06 911 7.01%
5 HSBC 218,245.86 884 6.16%

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4 HSBC 22,935.49 112 5.38%
5 ING 18,645.88 118 4.37%

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2 Goldman Sachs 11,713.19 63 8.33%
3 Morgan Stanley 9,435.23 48 6.71%
4 Bank of America Merrill Lynch 9,019.27 40 6.41%
5 UBS 8,763.73 42 6.23%