AP7, the largest of Sweden’s national pension funds, announced a 17.7% return for the default option it provides within the country’s first-pillar defined contribution (DC) premium pension system, with the resurgence in US technology stocks having delivered a boost.

The return is for AP7’s Såfa pension product, which combines the institution’s two “building block” equity and bond funds on a lifecycle basis. Separately, the two funds turned in half-year returns of 19.6% and 0.5%, respectively, according to their interim reports released today.

The bond fund return matched the gain of its benchmark between January and June, while the far larger equity fund outpaced its benchmark’s 18.4% gain, the figures showed.

Pål Bergström, AP7’s new chief executive officer, said: “I look forward to being involved in developing our strategy against the background of the new and broader mission that the fund has been given.

“At the same time, it is important to stick to what has guided the fund’s success historically,” he said.

Bergström added that he thought of AP7’s savings focus in combination with the importance of diversification and long-termism, as well as active and forward-looking sustainability work.

Total assets managed by the Stockholm-based state-owned institution rose to SEK1.07trn (€90.4bn) from SEK905.2bn at the end of last year.

The pension fund said the equity fund’s return for the first six months of the year, had been “mainly boosted by the recovery of US technology companies after being under pressure in 2022”.

AP7’s equity fund has a 60% weighting to the US, with 28% of the whole portfolio consisting of IT and telecoms stocks. Of the top 10 holdings, eight are the shares of technology-related companies.

For the whole of 2022, AP7’s default option registered a -9.5% loss, which was still much narrower than the average of the privately-managed options against which it competes.

The fund attributed 2022’s competitive win to the fact it had a higher currency exposure as well as the performance of its private equity and risk premiums investments.

AP2 behind AP1, AP4 in first-half returns as alternatives languish

AP2 became the third of Sweden’s national pensions buffer funds to report first-half results this morning, revealing a 4.8% return – lower than returns achieved by its peers AP1 and AP4.

The last of the four large buffer funds to deliver its H1 2023 report will be AP3 tomorrow.

AP1 and AP4 posted H1 returns of 6.6% and 6.0%, respectively, earlier this summer.

According to its interim report today, AP2’s largest allocation – a 34% weighting to alternative investments – produced a return of only 0.8% in the six-month period, while developed market equities, which make up 19% of the portfolio, returned 13.4%.

Among other asset classes, global green bonds – which comprise 11.9% of the portfolio – generated 7.5% in returns.

AP2 said its fund capital had increased to SEK423.9bn by the end of June from SEK407.1bn at the end of December.

Eva Halvarsson, the Gothenburg-based fund’s CEO, said the first half had continued to be affected by uncertainty in the financial markets as a consequence of geopolitical tensions, rising interest rates and economic effects on households.

“However, the performance of the equity and fixed-income markets during the period was positive, which contributed to a total return of 4.8%,” she said.

Looking ahead, Halvarsson said the fund believed the market uncertainty would continue.

“Against this background, it is satisfactory that we have spread the risks as far as possible between different types of asset classes and markets, between listed and unlisted assets, and between different management models,” she said.

“Our assessment is that, over time, this will generate a good and stable return, in line with our long-term mission,” the CEO said.

AP2 said its listed portfolio, excluding alternative investments and costs, beat its benchmark between January and June, with the fund reporting a 0.1% relative return.

Folksam pensions unit returns 5.6%, with only equities in the black

Swedish pensions and insurance group Folksam has reported a 5.6% six-month return for its pensions subsidiary, Folksam Tjänstepension (Folksam Occupational Pension), with the unit’s total assets increasing to SEK118.6bn by the end of June from SEK111.1bn at the end of December 2022.

Equities were revealed in the interim report as the only asset class to have produced a positive return in the period, with a 16% gain over the six months.

Fixed interest investments lost -2% in the period, as did alternative investments, while real estate lost -3% for Folksam Tjänstepension.

Equities make up 43% of the portfolio, fixed income assets have a 34% weighting, while alternatives and property comprise 13% and 10%, respectively.

Read the digital edition of IPE’s latest magazine