AMF, the SEK562bn (€59.4bn) Swedish occupational pension scheme, has warned members to lower expectations even as it posted a 7.3% gain for 2016.
Marcus Blomberg, acting CIO at AMF, said: “Our investments in real estate and infrastructure continued to give very strong returns in 2016, and the return on equities was also really good.
“That said, there is still reason to emphasise that we are apparently moving towards a lower-yield environment.”
Even though AMF had a long-term investment horizon and a strong financial position to help mitigate the expected downturn, it was not reasonable to expect the levels of return that had been achieved recently to be maintained over time, Blomberg warned.
The 2016 return was up from 5.3% the year before. AMF said its five-year average return rose to 8.5%.
During last year, AMF put aside SEK20.3bn in higher yield guarantees for customers with its collectively agreed labour-market pension SAF-LO.
Even after this move to strengthen guarantees, AMF’s solvency level of 190% was still the highest among comparable companies, it said, giving room for manoeuvre within asset management.
AMF said a high solvency level allowed it to invest in social infrastructure assets and real estate, which it had increasingly done in recent years to improve risk diversification and cope with low interest rates.
The solvency level has fallen from 211% at the end of 2015.
Premium income for AMF’s traditional pensions insurance fell slightly to SEK16.01bn in 2016 from SEK16.24bn in 2015.
At group level, AMF’s total assets under management rose to SEK563bn at the end of December 2016, from SEK527bn a year before.
AMF has around 4m members and is jointly owned by the Confederation of Swedish Enterprise (Svenskt Näringsliv) and the Swedish Trade Union Confederation, LO.