Switzerland’s €27 billion (US$30.35 billion) state run fund, AHV, has announced it will discontinue all agricultural commodity investments moving forward.
The fund’s new policy regarding soft commodities stems from a concern about ‘political sensitivity’ surrounding investing in livestock, food and agriculture.
In 2014, AHV’s commodity holdings registered a loss, returning -8.2%, and in 2013, registered -9.85%.
Under the fund’s new structure, commodity investments will still be allowed in energy and precious metals only, necessitating a change to the index, and the fund has also decided to manage government bonds in-house in U.S. dollars – measures that the fund expects will save in excess of half a million Swiss francs.
Currently, the fund has invested 26% of its real estate portfolio in overseas assets – mainly in North America and Asia through listing vehicles, but the fund has announced it is planning to incrementally increase exposure to foreign real estate through funds.
To increase transparency, the fund has implemented an operational risk report to supply the board with additional information beyond simply compliance, and has created a separate allocation for less liquid investments. In addition, hedging tools have been enhanced to include an in-house developed tail-risk hedging vehicle to increase the fund’s ability to better withstand market corrections.
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