The two largest Swedish pension funds have reported strong investment returns for 2019 on the back of rallying equities, but at the same time, both highlighted strategic shifts they made during the year which were sparked by thinking longer term.
Alecta, the biggest fund, reported a 20.3% return on its defined contribution (DC) pension scheme Alecta Optimal Pension for 2019, and 14.1% on its defined benefit (DB) product.
Magnus Billing, Alecta’s chief executive officer, said: “During the year, Alecta succeeded in delivering the best return in 20 years, and at the same time increased DB pensions and lowered the risk premiums for health insurance, developed our customer interaction and undertook ambitious improvement work.”
The Stockholm-based firm, which manages collectively-agreed occupational pension plans, said the background to the strong investment returns had been rising stock markets around the world.
Other contributing factors were a strong real estate market and falling interest rates during the year, it said.
During 2019, Alecta said its asset management department had revised the investment guidelines to ensure good long-term returns and good pensions.
“Above all, the revision relates to a broader selection of asset classes, preferably an increase in the proportion of real assets,” the pension fund said.
Meanwhile AMF, Sweden’s second biggest pension fund, reported it made a 13.7% return overall for last year, and saw its solvency strengthen to 194% from 182% the year before.
In preliminary 2019 financial figures, the blue-collar pension fund said equities had been the strongest performer, with this portfolio returning 31.5%, while fixed interest assets generated 2.5%, real estate 9.2% and alternatives 3.7%.
Johan Sidenmark, the firm’s CEO, said: “We are delivering a strong return to our four million customers, not least due to the strong year for the stock market.”
At the same time, he said, AMF was continuing to see signs of a downturn in the economy, and could see that the long-term challenges posed by the low-interest rate situation were still there.
“Therefore, it feels good that in 2019 we could continue our transition to a larger proportion of long-term assets in the portfolio,” he said.
CIO Thomas Flodén spoke last summer about the Swedish blue-collar pension fund’s plan to invest at an earlier stage in companies’ development, and stay invested for longer.
In the full year results announcement, Sidenmark said that in 2019 AMF had made a number of investments it believed would contribute positively in the long term, both in terms of returns and risk diversification, but also in the transition to a fossil-free society.
“We have grown within wind power and currently own capacity of 341 GWH, or about 4% of Sweden’s total capacity,” he said, also mentioning the fund’s first direct investment in forestry though its purchase of a majority stake in Swedish woodland owner Bergvik Skog Öst.