Swiss pension fund buys $480 million worth of gold

More and more pension funds are getting into gold to protect themselves against high inflation and losses on the bond portfolio. Recently, the Swiss pension fund Publica, one of the largest with $48 billion in assets under management, also decided to add more gold to its portfolio add. The fund already held precious metals, but wants to further expand this position to 1%. Why are more pension funds investing in gold?

In a explanation the pension fund writes that shares and bonds suffered substantial losses last year. The bond portfolio even underperformed the fund's equity portfolio, with a 12% drop in value last year. This is despite the fact that bonds still have a reputation as a safe investment among many investors. Due to the poor result in 2022, the Swiss pension fund has decided to reduce its bond portfolio by 14% and add 5% more shares.

Flight to tangible assets

In addition to shares, the Swiss pension fund also wants to include more gold and other tangible investments in its portfolio, because these Perform better in times of high inflation. From the press release that the fund recently issued:

"An analysis in 2021 found that inflation was very likely to be higher over the next decade than in the previous decade. As real assets tend to outperform nominal assets in an inflationary environment, the Governing Council has decided to lower the relatively high weighting of bonds in favour of a higher weighting of real assets and listed equities."

Last year, precious metals and real estate were the only asset classes in the fund to achieve a positive result. Precious metals returned 0.6% last year, while real estate investments returned 3.9%. The pension fund expects to achieve a better return in the coming years with a higher allocation in these investments.

$480 million in gold

Stefan Beiner, head of the asset management department at Publica, said in an interview with Top1000Funds that he wants to convert 1% of assets under management to gold. That doesn't seem like much, but on $48 billion in assets under management, that's still a hefty amount. If the fund wants to buy physical bullion with it, this represents the current Gold price from about $62,000 per kilo over 7,700 kilos of gold.

In May 2021, the pension fund of chemical group DSM announced that it would had bought a few hundred million euros worth of gold, about 5% of its total investment portfolio. A few months later, the American software company Palantir decided to $51 million of physical gold.

At the end of last year, Australia's sovereign wealth fund announced that it had a few percent of the assets under management Converted to the precious metal. This fund also cited the poor performance on its bond portfolio as a reason to buy gold. Will more pension funds follow suit and Buy gold as a safe alternative to bonds?

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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here  to subscribe.