Swedish national pension fund AP6, the only one to invest solely in unlisted assets, reported the highest annual return in its 25-year history for 2020, generating 20.4% on investments – more than twice that of the Nordic country’s other pensions buffer funds.
The Gothenburg-based fund – the smallest of the five buffer funds backing the main component of Sweden’s state pension – said in its annual report that the portfolio’s makeup had helped it weather the effects of the COVID-19 crisis.
Total assets grew to SEK45.2bn (€4.45bn) by the end of December 2020 from SEK37.5bn a year before.
Katarina Staaf, AP6’s chief executive officer, said: “Our analysis of the portfolio’s resilience proved to be correct, as our exposure to sectors hardest hit by the shutdowns was and remains limited.”
The investment portfolio return of 20.4% came from a large number of different investments, both realised and unrealised, with the co-investment portfolio returning more than SEK4bn and the fund portfolio producing than SEK3bn, she wrote in the report published on Friday.
In 2019, AP6 made an 8.2% return.
“We sold holdings for larger amounts than we invested during the year, which together with positive currency effects increased our liquidity during the pandemic year 2020,” said Staaf.
The pension fund’s average annual return over the past five years rose to 11.3%, and 8.5% over the last 10, AP6 reported.
“Based on our long-term investment focus, we made an early decision to maintain our investment work, but selectively and by prioritising our existing long-term relationships and existing holdings,” she said.
Staaf said it had been clear early on that the world central banks were fully committed to ensuring that the real crisis did not turn into a financial crisis.
In the annual report, AP6 said it made fund commitments totalling SEK7bn in 2020, which was somewhat higher than the previous year, alongside co-investments of approximately SEK2bn – slightly lower than the year before – describing this rate of investments as still good “in such an unusual and extraordinary year as 2020”.
AP6’s total return from buyout (mature companies) investments was 20.3% compared to a 22.0% return from venture capital (early phase) firms, with the latest five-year returns for these two private equity types coming in at 13.9% and 25.0%, respectively, according to the report.
Healthcare investments overtook technology firms as the dominant sector within AP6’s portfolio during the year, with the sectors making up 30% and 26% of employed capital at the end of December, respectively, compared to 25% and 26% at the end of 2019.
The main four state pension buffer funds, AP1-4 – which manage SEK124bn between them – made an average investment return of 8.1% in 2020 on their portfolios, which are more broadly diversified than AP6’s specialist mandate, according to a joint results statement from the four funds on Friday.