Alecta has waved goodbye to more than €1bn of its on-paper real estate investment by having to write down its holding in Swedish residential property firm Heimstaden Bostad, the pensions giant revealed today.

Announcing annual results this morning, the troubled Swedish occupational pensions firm posted an 8.7% return on its key defined contribution (DC) product Alecta Optimal Pension for 2023, and a 7.1% return on its defined benefit (DB) pension product.

Total assets increased to SEK1.24trn (€111bn) by the end of 2023 from SEK1.15trn a year before, said Alecta, the country’s biggest pension fund.

Peder Hasslev, Alecta’s chief executive officer from last September, said: “2023 was a very turbulent year that created a significant crisis of confidence for Alecta.

“We have implemented a number of measures, but are fully aware that it will take time and require hard work to regain the customers’ trust,” he said.

The year had been marked by Alecta’s part in investments in three US banks and in Heimstaden Bostad, the firm noted, which it said had prompted the Financial Supervisory Authority to initiate two separate investigations – as well as causing the the Prosecutor’s Office to initiate a preliminary investigation into suspected corruption crimes.

“Alecta’s holdings, with a total value of approximately SEK20bn, in the US banks Silicon Valley Bank, Signature Bank and First Republic Bank, became worthless in the spring when the banks collapsed in a so-called bank run in the US as a result of the rapid rise in interest rates,” the firm said.

“Heimstaden Bostad, Alecta’s largest single holding in which approximately SEK50bn has been invested, was negatively affected by the rise in interest rates. This led to a significant decline in value for Alecta’s shareholding in the company,” it said.

Losses on the US banks and the fall in the value of the Heimstaden Bostad holding had negatively affected 2023 returns for Alecta as a whole, it said.

Overall, the Heimstaden Bostad investment declined in value by SEK12.7bn over 2023, Alecta said, which equated to 25% of its value.

In the fourth quarter alone, the holding’s value fell by SEK8.7bn on Alecta’s books, or by 18.8% of its value, according to the statement.

“Of this, SEK2.1bn was attributable to a reduced net asset value in Heimstaden Bostad of 4.5%, and SEK6.6bn to a discount of 15% on Alecta’s shares based on an independent market valuation at the turn of the year,” it said.

Hasslev said that since his appointment as CEO, he had “continued and intensified” the work begun last spring to change management and reduce the risks in the equities portfolio.

“We are strengthening routines, reporting and risk monitoring within asset management, as well as strengthening leadership at all levels,” he said, adding: “We have also reviewed and reduced the risk in the equity portfolio.”

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