Swedish pension buffer fund AP1 recorded a 5.2% investment return for the first half of 2017, up from the 3.5% generated in the same period in 2016, according to interim data.

The fund’s assets swelled to SEK322.9bn (€33.2bn) by the end of June, from SEK310.5bn at the end of December. It passed SEK3.7bn on to the Swedish pension system in the six-month period for the payment of state benefits.

Johan Magnusson, AP1’s chief executive, said: “Naturally we are delighted to have helped strengthen the Swedish pension system for so many years, but the outlook for being able to [continue] delivering a high real return is more demanding. 

“The market conditions with long-term low interest rates are the primary factor that has increased returns and asset prices in such a way that it is realistic to expect a period of lower returns than normal for most classes of assets.”

The pension fund said that it had been particularly active in its real estate investment activity in the reporting period, making several direct investments.

These included increasing its holding of retail properties in Secore Fastigheter, the continued expansion of its investment in real estate company Willhem, as well as a new joint venture with Finnish pensions insurance company Elo.

The Swedish fund said its return outperformed its strategic benchmark by 1.2 percentage points in the January-to-June period, which equated to SEK3.6bn.

Magnusson said that as one of the referral bodies, AP1 would be familiarising itself with the details of the proposal for revised investment rules for the AP funds that the government recently presented.

“Generally speaking, however, we welcome the proposal as it brings our current investment rules up to date,” he said.

More modern, flexible rules could give AP1 a better foundation to achieve its return target in the long term, Magnusson said.