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​Alecta attributes strong Q1 in part to dovish turn by central banks

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Sweden’s largest pension fund, Alecta, has published strong returns in the first quarter of 2019 for its defined contribution (DC) and defined benefit (DB) pension products.

According to a report on its key figures for January to March, the fund’s DC product, Alecta Optimal Pension, generated a positive return of 8.1%, compared with -3.5% for the whole of 2018. Its DB product returned 5.6%, compared with -2% last year.

Hans Sterte, CIO at Alecta, told IPE: “We have seen very strong returns from equites, which are up 13 percent this first quarter, on the back of softer monetary policy stance from the Fed and other central banks.”

In the middle of the first quarter, the US Federal Reserve (Fed) — which has been raising interest rates in the second half of 2018 — said in a report that it would be patient as it determined what level of interest rates could be appropriate to support the economy. In March it said it anticipated no hikes for the rest of 2019 and only one more in 2020. 

Alecta reported that the group solvency ratio, however, was down year-on-year at 162% in this year’s first quarter, compared with 169% in the first quarter of 2018.

When asked if Alecta planned to make any changes to its portfolios in light of these recent results, Sterte told IPE: “We are not planning to make any major changes, but we are gradually increasing our exposure towards real investments.”

The five-year average return for the fund’s DC pension product is now 7.7% and for its DB product the average stands at 6.1%.

Assets under management grew to SEK761bn (€72.4bn) for DB pensions by the end of March from SEK734bn at the end of December, and to SEK115bn from SEK95bn for DC.

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