Contemplating the situation, Christoph Ryter, pension fund manager of the €850m Alcan fund and president of the Association of Swiss Pension Funds (ASIP), fights back laughter. “During October, most of the pension funds lost a similar amount to what they already lost in the first nine months. I would say it’s been the worst 12-month period since the introduction of compulsory pension legislation (BVG) in Switzerland in 1985,” he says, adding that, at the close of September, the average coverage ratio was 95 per cent, versus 110 per cent at the end of 2007.

“The predominant subject next year will be how to deal with underfunding and how to put together asset allocations that can help get the schemes to full funding in a reasonable amount of time,” says Michael Brandenberger, chief executive officer of consultancy Complementa.

The pain is widespread and this is why, particularly now, two key reforms may be able to provide succour to the ailing sector. Firstly, the deeply political minimum return rate has been reduced from 2.75 per cent to 2 per cent, providing funds with some breathing space and the ability to replenish buffers. The rate is the result of a compromise struck between the unions, who had argued for a rate of 2.25 per cent, and pensions professionals, who had argued in favour of 1.75 per cent.

For some that is not going far enough. “Let’s have the rate be 0 per cent,” says Fortis Investments Switzerland’s CEO Dominik Issler, “then the beneficiaries have the right to capital protection, but they do not have the right to return. I think that this will be discussed over the coming year”.

The second change applies to Article 59 of Swiss pensions regulations. Effective from January 1 of next year, the rule, which puts limits on where – and for how much – funds can invest in certain asset classes, is to be scrapped. In theory, this would free pension funds up to increase diversification – which the government has encouraged- and which would be especially welcome in the current climate.

It is arguable, however, whether this second change will do much more than bring existing legislation into line with the facts on the ground. Large funds had, up until now, been able to exceed the regulations by providing proof of prudence. However, it could help smaller funds in their quest to diversify.

The government-led drive for diversification has resulted in significant reform in terms of where Swiss pension funds can invest. The distinction between Swiss and foreign assets has been done away with and ‘fixed’ income is now purely that, regardless of its origin. Also, alternative investment has officially become an asset class with a modest but significant maximum limit of 15 per cent. At the same time, the amount of exposure to real estate has been capped at 30 per cent.

“The previous legislation was close to 30 years old, so this is a big milestone,” says Mr Issler. “Perhaps in the future we will see pension funds decrease their exposure to real estate and start putting it into alternative investments. These changes benefit the current situation because they focus on further and increased diversification; both on a global and regional level, as well as in terms of asset classes,” he says.

The nature of the Swiss pensions market, with its many small funds and relatively regionalised setup, together with the hunger for diversification, might to some make it seem ideally suited for the rise of fiduciary management. Indeed, if some parties – BlackRock, Mn Services, Barclays Global Investors – are to be believed, the rise of fiduciary management could soon be reaching the Alps. But those on the ground are yet to be convinced.

“I think it’s a clever way for asset managers to try to get full-size mandates and I don’t really see any advantages in it,” says Mr Brandenberger.

“I’m a little bit sceptical,” concurs Mr Issler. He points to what he says is the Swiss equivalent, the so-called anlagestiftungen (investment foundations) who pool assets of smaller pension funds and provide certain services. “There was a boom of these around 10 years ago and the result today is disappointing because their performance has so far not been better than that of independent asset managers. In the current market environment, where there is a lot of uncertainty and risk, pension funds will go back to basics and independent management will prevail,” he says.

Susanne Haury von Siebenthal of the €20bn Publica pension fund, however, believes that fiduciary management might yet have a role to play. “In an environment that is increasingly complex and demanding, it seems that some of the smaller pension funds are really facing a very heavy burden. This is where fiduciary management might well come in.”

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