Swedish state pensions giant AP7 today revealed an investment return of -9.5% 2022 for the default fund it runs in the country’s first-pillar premium-pension system – a big loss that is nevertheless much narrower than the average of the privately-managed options it competes against.

In its 2022 annual report published this morning, the Stockholm-based institution said its default option AP7 Såfa – a lifecycle mix of AP7’s building-block equity and bond funds which makes up 94.8% of the pension fund’s total capital – returned -9.5%.

This compares to the -11.6% return reported for the first half of 2022 and the 31.5% return posted for the product in 2021.

“During the same period, the private premium pension funds have given a return of -15.1%,” the pension fund said.

“The difference is explained, inter alia, by the fact that AP7’s products have a higher currency exposure than the private premium pension funds, but the development of AP7’s investments in private equity and risk premiums have also contributed positively,” it said in the report.

Richard Gröttheim said the “corrections” on the world’s stock markets in 2022 could to some extent be seen as healthy after several years of strong growth.

“At the same time, I note that our strategy of diversification has been successful during this turbulent year – both the global equity diversification but above all currency diversification, where the dollar effect has moderated the negative stock market trend for our savers,” said the CEO, who is set to leave AP7 by the beginning of July after 12 years at the top.

He will be replaced by Pål Bergström who currently works at Swedbank.

Comparing itself further to the privately-managed funds offered on the defined contribution premium pension system’s funds marketplace, AP7 said its risk level in 2022 – measured as standard deviation over the last 24 months – had been 13.0% compared to 13.5% for the private funds.

And since its inception in 2000, AP7 said Såfa had returned 7.4% a year on average compared to a time-weighted return of 4.8% for the private sector premium pension funds.

After a SEK44.6bn inflow of capital during 2022 from premium pension savers, and an outflow of SEK13.7bn – half the amount that left the fund the previous year – AP7 ended the year with total assets of SEK905.2bn, down from SEK966.9bn 12 months before.

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