AP4 has become the first of Sweden’s biggest national pension funds to report first half results, posting a 10% return, with its chief executive officer warning about the current tussle in financial markets between the bulls and the bears.
Niklas Ekvall, CEO of the Stockholm-based state pensions buffer fund, said: “A tug of war is currently in progress where the hope for a prolonged period of strong economic growth is on the one side and concerns about bottlenecks and rising inflation are on the other.”
Looking ahead, he said this conflict would probably result in an uncertain market environment.
In its interim report, the pension fund announced a return before costs of 10.0%, and 9.9% after costs.
By the end of June, AP4’s total fund capital had grown to SEK489.8bn (€48bn) from SEK449.4bn at the beginning of the year, according to the report.
Ekvall said that hopefully, the world was now gradually emerging from the most acute part of the COVID-19 pandemic.
“In the uncertain environment that is still prevailing it is natural that actors in the financial market are having a hard time determining what type of cycle the world economy is heading into,” he said.
As for the next few years, Ekvall said lower returns were to be expected on financial assets compared to what had been seen in the last 10 years.
AP4’s result for January to June was SEK44.5bn, with the fund making net payments into the pension system in the period of SEK4.2bn.
The pension fund said the active return generated on its portfolio had beaten the benchmark portfolio by 0.8 percentage points in the reporting period.
Ekvall said the first half return followed an “equally solid” return of 9.6% for the full year 2020.
“These are historically favourable returns, but they should also be viewed against the background of the massive financial and monetary policy stimulus measures that were introduced across a broad front in 2020 and early 2021,” he said.