Pension funds invest the funds contributed by the insured from the 2nd pillar across various different asset classes to ensure appropriate risk diversification. The contributed pension assets are invested in part in diversified funds consisting of several different asset classes, also known as “asset allocation funds”. In addition to fixed-income bonds and equities, the portfolio diversification spectrum may include other asset classes such as commodities, real estate and mortgage-backed securities. The asset allocation funds into which pension funds invest participants’ contributed assets differ primarily by the percentage of exposure to equity as an asset class. Within defined investment policy limits, fund managers can flexibly adapt portfolio allocations in view of current market conditions, in order to meet a long-term return target on the pension assets. Asset allocation funds offer the advantage of being compliant with the BVV2 investment regulations, ensuring that the pension fund fulfills its obligation to diversify its investment holdings.