AP4 has become the first of Sweden’s big four national pensions buffer funds to report results for the first half of 2022, revealing that its portfolio suffered a 12.6% loss after costs in the period.

The Stockholm-based fund released its interim report yesterday afternoon, saying its capital had diminished to SEK459.1bn (€43.27bn) by the end of June from SEK527.6bn at the beginning of the year.

Niklas Ekvall, chief executive officer of AP4, said: “The first half of 2022 was very challenging also from an historic perspective, with considerable market turmoil and not least sharply falling stock markets at the same time that interest rates have risen quickly,” adding that this had not left his fund unscathed.

The return for the first half was strongly negative, he said, but added that it had to be kept in mind that AP4 was a very long-term investor, and trying to evaluate an individual half year was not meaningful.

“If we stretch out the horizon a bit to also include 2021, AP4’s portfolio has delivered a positive asset management result of SEK19.1bn,” Ekvall said.

He said AP4 regularly conducted analyses about which asset allocation was best suited in relation to its obligations as a buffer fund for the income pension system.

“These show that AP4 needs a relatively high share of equities in our asset allocation in order to fulfil our mission in the best way over the long term,” he said, but adding that this meant the fund also had to be prepared for comparatively large fluctuations in its result from one year to another – and have a tolerance for large, negative results during individual years.

In the pension fund’s annual report, Ekvall described adjustments AP4 had made in its investment portfolio this year.

But he said that though the changes had at least partly strengthened its robustness to certain circumstances that took place during the spring, “I must also admit that we had not anticipated the extreme scenario that we are now in the midst of.”

Despite the negative return, AP4 did contribute SEK2bn to the national pension system in the six-month period, its figures showed.

In absolute terms, AP4’s loss between January and June this year was SEK66.6bn, and comes after an SEK85.7bn gain for the whole of 2021, according to the report.

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