SWEDEN – Investment returns at Sweden's Kåpan climbed to 10.5% in 2012, up from 3.9%, boosting solvency levels for the government employee pension scheme.

Equities were the highest performing asset class, producing a 16.5% return, followed by property, which returned 9.4%, according to the scheme's annual report.

Fixed income investments returned 8.3%.

Kåpan said in the 2012 report: "The general level of interest rates has decreased during the year generally on outstanding government and mortgage bonds, which affected the yield positively."

Because interest rates on government bonds remained at historically low levels, the return on investments was expected to give only limited current income in the next few years, it said.

Global stock markets performed strongly last year, the scheme noted, adding that the trend had been consistently stable in most countries and relatively evenly distributed between different areas.

"Since it began operations, the institution chose to hedge the majority of equity investments, so relative changes in the value of the Swedish krona during the year did not affect yield," Kåpan said.

But equity investments in emerging countries were not hedged, it added.

Kåpan has a 57% allocation to fixed income, 28% to equities and 9% to real estate.

Total assets rose to SKR53.7bn (€6.45bn) from SKR46.6bn.

The solvency ratio for 2012 increased by 11 percentage points to 133%, the scheme said.

The return contributed a 10 percentage-point gain, but changes in the valuation of outstanding liabilities caused a 1-point weakening.

However, premiums contributed 2 percentage points to the solvency figure, as the guaranteed rate was lower than the rate used for discounting the liability, Kåpan said.