The average funding ratio of Swiss private-sector pension funds edged down to 123.3 per cent in July, from a record 123.8 per cent in June, according to the latest Swisscanto Pension Fund Monitor.

The asset-weighted funding ratio for fully funded public-sector pension schemes also declined slightly to 117.1 per cent, down from 117.6 per cent, while partially funded public-sector schemes recorded a funding ratio of 94.2 per cent, down from 94.5 per cent.

Pension funds posted an average return of -0.2 per cent during the month, although the average return since the start of the year remained positive at 4.2 per cent.

Swisscanto said the decline reflected rising interest rates, which weighed on Swiss and international bond markets and Swiss real estate investments indirectly, despite positive equity returns.

Commodities were the strongest-performing asset class in July, supported by renewed tensions in Iran, while Swiss equities outperformed their international peers.

Looking ahead, Swisscanto said pressure remains on US President Donald Trump to de-escalate the conflict with Iran ahead of the US midterm elections, with any easing likely to reduce pressure on oil prices and interest rates.

It said it remains constructive on equities due to strong corporate earnings growth and positive global economic data, although elevated valuations and seasonal weakness could lead to a short-term consolidation in Swiss real estate.

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