SWEDEN - The Swedish default fund for the Premium Pension System, managed by AP7, returned 9.6% in the first half of 2007.

The SEK84bn (€8.9bn) Premiesparfonden currently has 2.4 million savers and holds 28.4% of the total capital in the Premium Pension System, according to AP7's half-year report.

Compared to the first half of 2006, the fund grew by SEK19.6bn including annual inflows from the Swedish government while the fund saw a nil return last year following market turbulences in March 2006.

Christian Ragnartz, chief analyst at AP7, also told IPE the impact of recent market turbulences on the fund's performance have yet to be evaluated.

Similarly, the full impact of the portfolio overhaul, finalised in May this year, will only become visible in the annual year-end report.

In addition to the default fund, state-run AP7 also manages a fund which people can actively choose among the hundreds of funds in the Premium Pension System.

The Premievalsfonden currently has SEK2.5bn in assets, which is around 0.8% of the total capital in the system. 100,000 people have so far chosen this fund and Ragnartz explained it is aimed at younger people so therefore takes a little more risk.

The fund returned 11.8% for the first half compared to a 11.3% benchmark return.

"This is mainly because of a greater exposure to Swedish equities and private equity," Ragnartz said.

"In the default fund Premiesparfonden, on the other hand, we are required by law to take less risk than the average fund in the Premium Pension System," he added.