Sweden’s AP social security buffer funds lost a total of SEK17.4bn (E1.8bn) in the first six months of this year, following the initial transition of assets to their management teams in January of this year.
The funds, AP1, AP2, AP3 and AP4 were all given even tranches of SEK134bn to manage at the beginning of the year in a bid to generate competition between them and improve returns.
AP1 fared the worst, recording losses of –4.1% or SEK5.9bn to bring the fund total down to SEK130bn after inflows of around SEK2bn.
The SEK132bn AP2 fund posted investment returns of –2.7% to June, losing SEK4bn – a figure offset slightly by a net inflow of liquid funds valued at SEK2bn.
SEK131.5bn AP3 lost approximately SEK5.6bn in the same time frame, offset by a net inflow of pension contributions of SEK 2.1bn.
AP3’s return on capital for the first six months of this year, adjusted for the net capital inflow, amounted to –3.4%.
Nonetheless, the return on AP3’s Swedish equity portfolio amounted to –10.8%, which was 1.6 percentage points better than the benchmark index. The fund says other portfolios have generated returns at about the level of their respective benchmarks.
AP3 says the negative contribution to the fund’s active return can be attributed to tactical asset allocation, where it has maintained an overweight position in equities during most of this year.
Tomas Nicolin, CEO of AP3, says he believes the necessary transition of the fund’s assets is now finished. But he adds: “Our asset/liability modelling (ALM) study showed that a changed asset mix would improve the probability of favourable outcomes for the pension system, while diminishing the probability of unfavourable outcomes. I am satisfied that the necessary transition of the assets under our management is now completed.”
The AP4 fund fared slightly better than its sister funds, posting losses of SEK1.9bn.
o AP2 has also appoint a new chief investment officer (CIO) and head of communications.
Petter Odhnoff joins as CIO from his previous position as a partner at Deloitte & Touche, where he headed the company’s investment consulting activities.
He has held the position of acting chief investment officer at the fund since the beginning of the year. Odhnoff was formerly CIO at Sparbanken Sverige, prior to which he spent seven years in New York, where he worked for SEB, Carnegie and Oppenheimer & Co.
Lennart Jonsson joins the fund as head of communications from Carta Booz, Allen & Hamilton, a firm of consultants in which he was a partner.