SWITZERLAND - Publica, the largest Swiss pension fund, is planning to sell its CHF1.1bn (€910m) mortgage portfolio to the Berner Kantonalbank.

The fund told IPE the decision was made in November 2010 in the course of a regular review of asset allocation by Publica's strategic body, the Kassenkommission.

A spokesman said the minimum return of 3%, which Publica is obliged to generate to maintain its funding level, could not be achieved with mortgages in a low interest-rate environment.

For the first half of 2011, Publica reported a 1.09% return.

In a statement, the CHF33bn scheme said: "The sale was a strategic long-term decision and is not directly related to the current situation on the market."

According to Publica's spokesman, a few mortgages for housing cooperatives will remain in the portfolio.

No decision has been made yet on how the money from the sale will be used.

According to the declaration of intent signed by Publica and the Berner Kantonalbank, the portfolio will be sold off from January 2012 with no alterations to the existing contracts.

The bank will also take on the 20-odd staff members who have handled the management of the portfolio at Publica to date.

Publica and the Berner Kantonalbank said the portfolio - which mainly consists of contracts on property in the canton of Bern and neighbouring cantons - was a "matching addition" to the bank's existing mortgage portfolio.