Swiss pension funds are reassessing foreign currency hedging for US dollar-denominated assets and gold, while largely avoiding tactical shifts.
Publica is reviewing its strategic asset allocation, a process conducted at least every four years. This includes its strategic currency hedging programme, although the pension fund does not expect substantial changes.
“We determine hedge ratios along asset classes and will continue hedging 100% of our fixed income, international real estate and private market portfolios,” said deputy chief investment officer Patrick Uelfeti.
For equities, Publica maintains a strategic hedge ratio of 60%, except for the US dollar.
“We are contemplating a small increase in the hedge ratio to take the large exposure our portfolio has to the US dollar into account. We continue to leave emerging market currency exposure unhedged,” Uelfeti said.
Key drivers of hedge ratios include hedging costs, carry and base effects, as well as structural changes in volatility and correlations between currencies and underlying asset classes. Publica avoids tactical currency positioning.
“Moreover, we also take the remaining unhedged foreign currency exposures into consideration,” Uelfeti added.
Migros Pensionskasse (MPK), with CHF29.5bn in assets, has a lower exposure to foreign exchange risk than the Swiss average, which supported returns for a Swiss franc-based investor last year.
A strategic gold allocation of around 3% and a higher hedging ratio contributed to a 6.5% return in 2025.
MPK hedges foreign currency exposure in equities at around 50%. In other asset classes – including bonds, international real estate and infrastructure – currency risks are hedged up to 100%, said chief executive officer Christoph Ryter.
“Gold is an exception and is technically classified as a foreign currency risk. However, we have decided that the gold-Swiss franc exchange rate is relevant for us, and we don’t hedge against it,” he added.
An increase in equity allocation by 2 percentage points and gold by 1 percentage point led to a rise in open foreign currency exposure to 15.9% at the end of 2025, from 14.5% a year earlier, Ryter said.
Foreign currency exposure falls to around 12.5% when excluding gold.
Long-term approach to FX risk
St Gallen Pensionskasse (SGPK) said its foreign currency hedging strategy is primarily risk-driven and not based on market expectations.
Adjustments are made in response to structural changes, such as shifts in strategic asset allocation, risk budget adjustments, regulatory developments and asset-liability management considerations.
The scheme aims to systematically reduce currency risk and smooth overall portfolio volatility.
Partial hedging of equities – for example 50% – reflects the long-term diversification benefits of foreign currencies, while bonds are consistently hedged as currency risk is not compensated.
Short-term factors such as hedging costs, currency fluctuations or movements in individual currencies like the US dollar do not typically trigger tactical adjustments.
“Fine-tuning may be made if the structural framework changes significantly, but not due to short-term market developments,” SGPK said.
