Summary of the Pension Fund’s activities in 2008

(For more information, please refer to the Annual Report)


The Pension Fund Governing Board (PFGB) held seven meetings in 2008. At the end of the year, it unanimously approved the appointment of R. Balfe as successor to P. Lambert, who had stepped down. The PFGB approved the new strategic asset allocation, which was also submitted to CERN’s governing bodies in June. The PFGB also took in particular the following decisions:

  • Appointment of PriceWaterhouseCoopers as a specialised external auditor, in line with the new governance measures decided by the CERN Council;
  • Adoption of the International Public Services Accounting Standards (IPSAS).

The year 2008 was characterized at the institutional level by a further implementation of the new governance structure in the Pension Fund and the four working groups set up by the PFGB in 2007 continued their work in 2008.

Working Group 1 completed its tasks on the composition of the Investment Committee and on the code of conduct, and also continued its work on the status of the Fund’s personnel and the terms of reference of the PFGB and Investment Committee, as well as setting up a new internal control system. Regarding the code of conduct, it entered into force on 1st January 2009 following approval by the Council on 12 December 2008, applies to the personnel of the Fund, the members of its bodies and its commercial partners, and can be consulted on the Fund’s website (under the "Rules" heading).

Working Group 2, which is responsible for defining the Pension Fund’s funding policy and principles, is making steady progress. A preliminary report on the important matter of full capitalisation in the context of the funding strategy is due to be submitted before the end of 2009

Working Group 3 was entrusted with the selection of Investment Committee experts. As a result of this work, the PFGB was able to appoint Susanne Haury von Siebenthal, Chief Investment Officer of the Publica Pension Fund in Bern, and Stewart Colley, former head of the British Steel Pension Fund in London, as new experts to the Committee.

Working Group 4, whose remit included the selection of a new General Manager, made a recommendation to the PFGB following a series of interviews. In the meantime, the appointment of Mr. T. Economou was approved by the Council in June 2009 for an entry into function on the 1st September 2009.

Governing Board (as of 31 December 2008)

Members Appointed by:
F. Ferrini, Chairman CERN Council
D.-O. Riska CERN Council
C.J. van Riel ESO Council
S. Lettow Director-General of CERN
G. Deroma CERN Staff Association
D. Duret, Vice-Chairman CERN Staff Association
F. Derie ESO Staff Association
F. Wittgenstein CERN-ESO Pensioners Association
Ph. Lambert CERN Council, on the proposal of the Governing Board Members
J.-A. Schneider CERN Council, on the proposal of the Governing Board Members

Administrator: C. Cuénoud, appointed by the Council on the proposal of the PFGB with the consent of the Director-General.


The Pension Fund provides coverage against the economic consequences of old age, invalidity and death.

The Fund also pays transfer values in cases where a Fund member leaves the Organization prior to retirement, or under certain conditions it may offer a deferred pension.

Key figures

2008 2007
Overall performance of the assets -19.3% 6.2%
Swiss average (Swisscanto) -15% 2.1%
Net operating result -1024.3 MCHF +140.2 MCHF
Fund assets 3589.7 MCHF 4’614.0 MCHF
Active membership 3086 3183
Number of beneficiaries 3198 3105
Benefits paid 265.1 MCHF 256.1 MCHF
Funding ratio1) 82.0 106.3

1) Closed-end fund calculation: assuming liquidation of the Fund without pension indexation (see also Actuarial results below)

Graph 1 - The overall trend in the Fund’s financial position in 2008.

Graph 2 - Data as at 31/12/2008 are accounting values, while monthly data are estimates. Each month, the graph shows the performance with respect to the 01/01/2008.

Graph 3.

Overall assets

Financial Position

The overall trend in the Fund’s financial position in 2008 is summarised in graph 1. It should be noted that the result of the Fund’s overall accounting movements, namely the sum of investment results at end-of-year market prices, taking account of value adjustments, and the balance between contributions and benefits, is -1’024 MCHF.

Investment Performance

In 2008, like most institutional investors, the CERN Pension Fund was impacted by the market turmoil. At the end of the year, the performance of the Fund’s assets stood at -19.3% according to the Time Weighted Return method. This result is under the average of other Swiss pension funds, but over a longer term horizon, CERN Pension Fund still out-performs its peers.

Most of this performance is explained by the sharp decrease of equity markets worldwide. (the MSCI World Index decreased by 45% in CHF terms). Furthermore, it is important to note that:

  • The CERN Pension Fund did not invest in Hedge Funds, mainly for transparency and liquidity reasons. No loss was recorded in that field.
  • Despite the systemic risk on the markets, which translated into bankruptcies of financial institutions, the Fund did not suffer any losses linked to its relationships with banks and counterparties.

Monthly cumulated performance of the Fund (see graph 2)

Risk / Return profile

The graph 3 shows the Fund’s overall risk/return profile of the Fun and, for comparison, the risk/return profile of the Pictet LPP40 Plus index, whose asset allocation most closely resembles that of the Fund. Data is shown for 2 years (2006-2007) and then 3 years (2006-2008). This highlights the consequences of 2008 both in terms of risk (measured by volatility) and returns.

As expected, adding 2008 to the metrics brings additional risk and negative performance. Plots move to the south-west. It is interesting to note that the difference in risk between the Fund and the Index has been reduced in 2008.

Breakdown of assets

To optimise long-term risk and performance parameter assumptions, an asset-liability modelling exercise is carried out as a basis for determining the strategic asset allocation (SAA). The exercise takes into consideration all the Fund’s specific characteristics (demographic data, contributions, benefits, indexation, etc.), and sets long-term objectives. Margins of fluctuation around the strategic asset allocation allow tactical adjustments. The strategic allocation is the main component of investment policy to achieve long-term target returns, while tactical adjustments reflect short-term responses to prevailing market conditions. The Investment Committee is responsible for making such tactical adjustments.

In 2008, a new Strategic Asset Allocation has been approved by Council. The main changes related to the absolute return category (10%), the introduction of Corporate Bonds (10%) and the ability to go into infrastructure investments within the real estate allocation.

Sub asset class
SAA Tactical margins Effective
as at 31.12.2007
as at 31.12.2008
Deviation from SAA
1 2 3 4 5=4-1
30-45% 35.9%
US Large Cap
US Small Cap
Eur. Large Cap
Eur. Small Cap
Emerging markets

Max 10%


Diversifying Assets
Absolute return
Private Equity
10-20% 6.0%
REAL ESTATE 15% 10-20% 10.7% 14.8% -0.2%
CASH 0% 0-10% 8.9% 6.4% 6.4%

Given the change in the SAA in 2008, and for comparison purposes, the 2007 allocation was adapted to integrate investments under the previous SAA into suitable categories in the new SAA.

Over the course of the year, the main tactical decisions taken by the Investment Committee were:

  • the decision not to systematically rebalance the allocation with respect to its strategic levels. Such policies often result in increasing poorly performing asset classes to the detriment of well performing ones,
  • in January, the PFIC decided to move 50 MCHF out of cash into European and US equities,
  • 20 MCHF were invested half in European and half in US Equities in July,
  • in June, a new portfolio of 100 MCHF dedicated to corporate bonds was launched,
  • in August, the PFIC decided to reduce the European Equities by 35 MCHF and to equally invest the proceeds half in Canadian and half in Australian equities,
  • to maintain the tactical decision to partially hedge the currency risk of EUR denominated assets in a range between 50% and 70%.

With respect to investment managers, two mandates have been stopped for performance reasons (JP Morgan on Global Bonds and Legg Mason on US equities). The amounts have been replaced by passive investments or allocated to existing mandates. A new Corporate Bond mandate has been initiated in May, managed by Franklin Templeton.

Long-term results

Considering that the liabilities of the CERN Pension Fund are long term by nature, its performance should also be contemplated over the long term. The time-weighted return (TWR), calculated for the preceding ten-year period, decreased from 5% (1998-2007) to 2.2% (1999-2008). Over the life of the fund (since 1957) the Internal Rate of Return (IRR) stood at 4.9% (5.7% as of the end of 2007), thus below but very close of the Fund’s 5% target. These figures highlight the important impact of year 2008, which has been intensified by the maturity of the Fund. It is important to note that the technical rate retained by Council (4.5%) is still consistent with the gross rate of return over 20 years or more.



The graph 4 shows membership as at 31 December 2008, including those whose contract terminated on that date. There were 358 departures from the Participating Organizations. These included 112 retirements, of which 67 were early retirements, i.e. before the age of sixty-five, and 45 members retiring at 65. In 2008 the number of members decreased by 97.

Graph 4.

At 31 December 2008, the average age of members was 41 years and 7 months for women and 43 years and 9 months for men. The graph below shows the age distribution of the Fund membership.

Age distribution of Fund membership at 31 December 2008 (Graph 5)

Graph 5.


The number of beneficiaries at 31.12.2008, including participants in the Progressive Retirement Programme, was 3198, representing a 1.03% increase compared to the total at 31.12.2007 (3105).

Graph 6 shows the net fluctuations by category of beneficiary over the last two years.

At the end of 2008, the average age of those receiving retirement pensions (retired people and surviving spouses) was 72 years and 3 months for women and 71 years and 7 months for men, which represents a slight increase compared to 2007.

Graph 6.

Actuarial Results

Every year the Fund has been reviewing its actuarial position using the closed-fund method (Accumulated Benefit Obligation, ABO or traditional method), which gives a snapshot of the financial position of the Fund at a given moment without taking future developments into account. The funding ratio has deteriorated substantially from 106.3% on 1 January 2008 to 82.0% as at 1 January 2009. The reasons are threefold: the negative result achieved in 2008 is the most important, but also the continued rise in the mathematical reserve for the pensioners, and the negative cash-flow has also played a role.


The decision of Council to introduce International Public Accounting Standards (IPSAS) at CERN has meant that the accounts of the Pension Fund should be prepared in accordance with those principles. IAS 26 permits that the actuarial present value of promised retirement benefits can be calculated using the Projected Benefit Obligation method (PBO) which is based on the approved actuarial assumptions. Based on the PBO method the funding ratio or rate of capitalisation fell from 94.4% as at 31st December 2007 to 72.7% as at 31st December 2008.

It should be noted that the view of the liabilities based on ABO as well as PBO does not take into consideration the renewal of staff complements, which for an international public organisation like CERN is a very important factor. Historically, at least since1989, the actuarial reviews presenting the position of the Pension Fund have always been prepared using the concept of an "open-end fund" with a 30 year projection. The positions given by these actuarial reviews will continue to provide the framework for the decisions on how the Fund is to be managed (asset allocation, investment and funding policy)


Throughout the life of the CERN Pension Fund there have always been economic and financial cycles that have impacted positively and negatively on the assets of the Fund. But, no doubt, in financial terms 2008 will go down on record as the most difficult year the Fund has ever experienced in asset management and one of the worst years for equity markets since the Great Depression in the 1930’s. Despite the decline in assets last year, the Fund should not be too oriented towards the short-term. Such a view has always proved over time to be a drag on return. This is the reason why the Fund maintains a long-term dynamic approach and, as much as possible, a diversified asset management style, which should allow the Fund to recover to some extent in the future.

The Fund maintains intact its ability to meet pension benefit payments in the short and medium term. The present under-funding of the Fund does not mean that the institution is insolvent, but rather is an indicator of its capacity today to meet its future liabilities. These liabilities are long-term in nature and measures are already under consideration to fully address the growing long-term liabilities compared to the assets.

As decided by CERN Council, the financial statements in the Annual Report have been prepared and presented according to International Public Sector Accounting Standards (IPSAS). The structure and content of the Report are thus radically different to previous versions. Also for the first time, following a decision of the CERN Council, an additional specialized Pension Fund audit has been carried out. These initiatives have proved entirely successful and should provide additional assurance with regard to the prudent stewardship of the Fund’s assets.

The graphs and data used in this summary are taken from the Annual Report for the CERN Pension Fund for 2008 (document CERN/2840-CERN/FC/5340), which members of personnel may obtain a copy from Departmental Secretariats. Beneficiaries may also obtain a copy of the Annual Report from the Benefits Service (Emilie Clerc, tel. 022-767 87 98). The Annual Report contains detailed information on all aspects of the Fund’s activities. If you would like more detailed information about your Pension Fund, we strongly encourage you to read the Annual Report or to consult the Fund’s Web site and to attend the Annual General Meeting, whose agenda is indicated above.

by HR Department