Sweden’s largest pension fund Alecta saw its investment returns on both defined benefit (DB) and defined contribution (DC) products dip in 2016, with solvency levels also contracting.
The return on DB pensions was 5.1% in 2016, according to full-year figures just released, down from 5.8% in 2015. DC pensions ended last year with a 5.8% return, down from the 7.9% produced the year before.
Alecta pointed out that the five-year average for the two pension types was 8.9% and 12.5% as of last year, .
Magnus Billing, the current chief executive of Alecta, said: “I am proud of [DC fund] Alecta Optimal Pension’s long-term return over the five-year period.”
The slight fall in returns followed a warning from Alecta’s then-chief executive Staffan Grefbäck a year ago that the good return seen over many years and the low level of interest rates suggested future expectations should be kept low.
Speaking about 2016 results, Billing said the company had now completed its recent property transactions in the US and could focus on drawing efficiency benefits from its ongoing property management.
Earlier this month, Alecta offloaded the last of its directly-held US real estate assets, selling its portfolio of 22 assets, worth around $1.8bn (€1.7bn).
Following the US property sales, Alecta has now exited all its directly-held international real estate investments, in accordance with its new strategy.
“We also recently reached a milestone of having SEK10bn [€1.1bn] invested in green bonds,” Billing said, adding that it was “excellent and quite natural” that Alecta put part of its managed assets into this type of sustainable investment.
The portfolio of DC product Alecta Optimal Pension now had SEK70bn in assets, of which 63% is invested in equities, Alecta said.
Meanwhile, the DB pension scheme had assets of SEK697bn at the end of December 2016.
The group solvency level fell to 166% at the end of 2016, from 171% a year before, but Alecta still described this as strong.
Administrative costs fell to 0.09% from 0.1%.