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AP3 doubles green bond investments, posts 9.4% annual gain

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Sweden’s third national pension fund, AP3, made a 9.4% return on investments last year, after expenses, boosted by equities, inflation, and currency risk.

This is up from the 6.8% it generated in 2015, the fund reported.

Kerstin Hessius, chief executive of the Stockholm-based pension fund, said: “A net result of SEK28bn [€2.9bn] is a strong performance, especially considering the weak performance of equity markets in the first six months of the year.”

This net result in absolute terms was up sharply from the SEK19.6bn produced in 2015.

Releasing its 2016 annual report, the SEK324bn pension fund said that, within its investment portfolio, the “risk categories” of equities, inflation – which includes real estate – and currencies made the largest positive contributions to income.

The result brought the annualised return after expenses over the past five years up to 10.9%, from 8.4% in the period ending 2015. However, the 10-year annualised return remained on the same level as the previous year, at 5.7%.

Hessius said AP3 had doubled its holdings in green bonds during the year, cementing the pension fund’s position as one of the largest Nordic investors in the instruments.

Green bond investments rose to SEK9.5bn from SEK4.5bn.

The issuance of green bonds – instruments linked to environmentally friendly investments – has grown strongly since 2012.

AP3’s overall capital grew to SEK324.4bn, from SEK303bn during the year.

Along with Sweden’s other main buffer funds AP1, AP2, and AP4, AP3 exists to create long-term returns to make up any shortfall between pension contributions and disbursements in the state system. AP3 made payments of SEK6.6bn into the pension system in 2016.

This was in line with the payments made by AP1 and AP4, but higher than the Gothenburg-based buffer fund AP2, which paid SEK4.9bn into the state pension fund last year.

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