Alecta this morning revealed the pace of this year’s investment losses slowed in the three months to September, or stopped – but Sweden’s largest pension fund also warned that the expected downturn in real assets valuations was likely to happen before the year was out.

According to the pension fund’s interim report, the default portfolio in Alecta’s defined contribution (DC) product Alecta Optimal Pension – which has a 60% equities weighting – ended September with a 13.1% loss for January to September, following the 12.7% loss previously reported for the year to date at the end of June.

Meanwhile, the defined benefit (DB) product, which makes up the bulk of Alecta’s assets under management, registered a 9.4% investment loss in the first nine months of this year – after losing only 0.7% in the third quarter, a much slimmer decline than the 4.4% and 4.5% losses suffered by the product in the first and second quarters of 2022, respectively.

Total assets, according to the interim report, stood at SEK1.120trn (€102bn), little changed from the SEK1.124trn reported for January to June this year.

A spokesperson for Alecta told IPE: “We saw small losses during Q3 for defined benefit, and no losses for defined contribution (Alecta Optimal Pension),” adding that it had been the first half of the year that had contributed to the negative returns development.

“For real assets – mostly real estate – we have not seen the downturn in valuations yet, but we expect it to come in the last quarter,” the representative said.

“Despite a negative value development this year, our financial position has strengthened, which is due to interest rates continuing to rise in combination with the shift we have made during the last years towards more real assets and less equity, and our clear focus on cost efficiency,” the spokesperson said.

Alecta’s group solvency ratio stood at 214 at the end of September, up from 211 at the end of June, and 190 a year ago, while the DB collective consolidation percentage was 189 at the end of the third quarter, up from 185% at the end of June – and from 169% at the end of September 2021.

The collective consolidation ratio shows the difference between assets and obligations to policyholders.

Assets under management on the Stockholm-based pension fund’s DB business fell to SEK907bn at the end of September from SEK916bn three months before, according to the report.

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