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Sweden's AP3 sees strong returns on inflation holdings

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Sweden’s AP3 returned nearly 7% over 2015, with its inflation risk category posting by far the strongest returns.

Despite the return’s being down by nearly half compared with 2014, chief executive Kerstin Hessius said she was satisfied with the results, “especially in the light of the turbulence we saw in the financial markets”.

The return, down from 13.8% in 2014, nonetheless saw AP3 outperform its benchmark by 4.4 percentage points.

The fund’s exposure to inflation, which included its real estate holdings, achieved a return of 14.7%, far ahead of its four other risk categories.

AP3’s inflation holdings accounted for more than 37% of the gains seen over 2015.

The equity risk category followed inflation, returning 3.4%, but only contributed 28% to the fund’s return, behind the 30% contributed by AP3’s currency risk category.

The interest rate and credit exposure fared worst of the five risk categories, only achieving returns of 1% and 0.8% return.

In a statement, AP3 nonetheless highlighted that its annual return since inception in 2001 stood at 5.5%, ahead of the income index used as a basis for adjusting the income-related pension payment, which the buffer funds help finance.

“The fact our return on invested capital has exceeded the income index by 2.5 percentage points on an annual basis reflects the strong contribution to the stability of the pension system we have made during the period,” Hessius added.

At the end of 2015, AP3 managed SEK303bn (€33bn) in assets, having contributed nearly SEK5bn to the pension system.

AP3 recently announced a series of sustainability targets that will see it treble its green bond holdings to SEK15bn and double its exposure to water treatment to SEK20bn. 

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