Swedish pension buffer fund AP1 produced a 9.3% return in 2016, with real estate and currency factors boosting results.

However, the fund warned it would be hard to keep producing current levels of return given the AP funds’ mandatory fixed-income allocation.

In its 2016 annual report, AP1 said its net investment income amounted to SEK27bn (€2.8bn) after expenses, equating to a 9.3% return — more than double 2015’s 4% return.

Johan Magnusson, AP1’s chief executive, said: “The main contributions came from real estate as well as from allocation and foreign exchange.”

Total assets grew to SEK310.5bn at the end of last year, from SEK290.2bn at the end of 2015.

AP1 said it paid out SEK6.6bn to the state to help pay state pensions during the year.

Over the last 10 years it said it made a real return of 4.3% annually after expenses, which meant it had beaten its target in both the short and long term.

However, Magnusson said AP1 faced a challenge in maintaining this development and reaching the target of a real 4% return on a rolling 10-year basis.

“This is due to several factors, such as the many uncertain market factors around the world as well as our relatively high percentage of fixed-income assets which are governed by the investment rules that apply to AP funds,” he said.

In the annual report, Magnusson said AP1 has refocused strategically and organisationally in the last year with renewed energy following the shelving of reform plans.

“Before the turn of the year 2015/2016 the plan to reform the AP Pension fund system was shut down, which meant that we could seriously and credibly dedicate ourselves to further development of our corporate culture and strategic direction,” he said.

Real estate – which made up 12.5% of the total portfolio at the end of 2016 – was the most profitable asset class during the year, generating an 18.8% return.