By Muskan Arora
Stephan Bereuter, CIO of $30bn Migros-Pensionskasse
considers the bottom-up and top-down approach of its internally managed
portfolio as a “technical leeway” to success.
The system returned 8.40%, 2.10% and 4.20%
respectively for its 1-, 3-, and 5-year returns, as of September 2024
“The know-how and expertise in different
asset classes with internal teams has allowed us to have a wider view of
opportunities in the market that might be missed by other pensions who are
dependent on external asset managers or consultants, and don’t always have the
expertise to judge an allocation,” said the CIO to Markets Group.
The Swiss pension manages
roughly 90% of the assets internally and has a large exposure to real assets
along with corporate hybrids or AT1s.
“Our strategy is really to go into real assets (37%
of the assets are allocated to Real Estate and Infrastructure), Equities (28%)
and Gold (2%) and have less fixed income and nominal reading assets,” said the
CIO.
As the Swiss Real Estate portfolio is the “backbone” of
the pension’s stable income returns of above 3%, almost two thirds of the
pension plan’s employees are focused on the sleeve.
Alongside managing the whole value chain for the
Swiss real estate portfolio including portfolio management and strategy, the
pension plan also is hands on with its transactions, development and
maintenance.
The Swiss RE portfolio returned 2.50%%, 4.80% and 5.70%%
for its 1-, 3-, and 5-year return, as of September 2024.
Within its actively managed global real estate
portfolio, the system had an overweight in residential and logistic properties
with an underweight in office sector.
In early 2022, the sharp rise in interest rates
pushed the CIO to “redeem a substantial part” of the
portfolio.
“That was just early enough to really get out
before the redemption queues went through the roof and nobody could get out,”
said the CIO, which has in turn opened new opportunities for the system.
Further, the CIO highlights the lack of
anticipation of higher interest and cap rates resulted in some managers facing
“leverage problem”.
While data centers are on everyone’s radar, the CIO
has highlighted those dislocations in some hard-hit markets could lead to
opportunities. While it seems too early to tap into office, other sectors start
to offer value including shopping centers, which have had a few rough years.
Along with facing a difficult time with e-commerce
and losing customers, the pandemic hit both retail and shopping centers
adversely.
“Those shopping centers that survived all of that
up to now and still have good cash flows could maybe offer some value,”
said the CIO while indicating that it's fairly early to find good projects in
the sector.
Bereuter also
identified life sciences as a sector with a strong “underlying growth trend”
alongside core investments within residential and logistics sectors.
The huge shortage of global housing, including US
and Europe among others in hand with higher interest rates, has made
residential highly favorable in the current times.
Data centers and digital infrastructure are known
for “huge energy consumption” which has and will continue to have environmental
implications.
For the investor, this gap has opened doors towards
clean energy allocation.
Widening the horizon, the Swiss pension plan also
looks towards investing further in wind, solar and batteries.
“We have a lot of solar and wind projects all over
the world, actually, Europe, the US, but also Asia Pacific,” said the CIO.
“Within the space, I'd rather take some development
risk and be on the early, on the development side of the projects than only in
the core allocations,” added Bereuter.
