Sweden’s largest pension fund, Alecta, reported overall investment losses for the first quarter for both its defined contribution (DC) and defined benefit (DB) products, but its CIO said alternative investments – which the institution has been building up – helped mitigate falls in equity and bond values.
In its interim report published this morning, Alecta said the DC product Alecta Optimal Pension ended the January-to-March period with a return of minus 6.2%, and its DB pension suffered a negative return of 4.4% over the three months.
However, monthly returns for Alecta Optimal pension profiles with at least 40% equities turned positive in March, following losses in both January and February, though profiles with an equities quota of just 10% clocked up losses in all three months, albeit narrower as the quarter progressed, according to data from the Stockholm-based pension fund.
Hans Sterte, Alecta’s chief investment officer, told IPE that the pension company’s alternative investments, of which 75% are real estate, made a positive 3.5% return in the first quarter.
“We have significantly increased our alternative investments in recent years and the increased diversification helped to counteract part of the decline that resulted from both shares and bonds losing value,” he said.
Asked about the outlook for returns, Sterte said that because there were so many uncertainties affecting the market right now, it was virtually impossible to predict the development for the rest of this year.
“The security policy situation in Europe after Russia’s invasion of Ukraine, how much monetary policy will be tightened in the wake of the rapid rise in inflation and how the coronavirus’ continued spread will affect the world economy, are some of the more important factors to keep in mind for the rest of the year,” the CIO said.
Alecta’s total assets under management declined to SEK1.18trn (€113bn) at the end of March from SEK1.23trn at the end of 2021.
The firm’s group solvency ratio rose slightly to 204% from 201% in the same timeframe, however.
Earlier this month, Alecta announced a near-€100m investment in the 105 Victoria Street project in London, which it said would be the UK’s largest climate-neutral office property.