AP2, Gothenburg, Sweden, recorded a -1.3% return for the second half of 2018, with assets falling 4.9% in the period to 334.8 billion Swedish kronor ($36.9 billion). An update on Monday said the negative return meant a 4.3 billion kronor loss, compared to a 9% gain for the six months ended Dec 31, 2017, when the fund returned 28.8 billion kronor.
The pension fund’s 10-year annualized return was 7.7% for the period ending Dec 31. Over the past five years the fund returned 5.8% annually.
“For AP2, 2018 was characterized by an underlying strong global economy, but also by some turbulence in the markets as a result of various geopolitical events, preparations for the changed investment regulations and continued sustainability integration,” AP2 CEO Eva Halvarsson said in a release accompanying the financial update.
The fund’s largest portfolio exposure was to developed market equities, at 19.3%. The allocation lost 3.3% in the six months ending Dec 31. A 10.4% allocation to emerging market equities returned a negative 7.3%, while a 8.8% exposure to Swedish equities lost 4.6%.
Swedish fixed income, with an allocation of 11.9%, returned 0.8%; foreign government bonds exposure of 4% gained 5.9% and a 6.5% emerging market fixed-income allocation returned 3.3% for the six months ended Dec. 31.
The fund’s 1% allocation to green bonds gained 4.7% in the period. The remaining 28% of the portfolio was invested in alternative assets, which returned 7.4%.
“The downturn in the equity portfolio was counteracted by solid returns on, for example, private equity investments, real estate and Chinese government bonds,” Ms. Halvarsson said.
AP2 welcomed the new investment regulations, which became effective Jan.1, that allow Swedish funds to boost investments in unlisted assets. Funds can invest up to 40% of portfolios in illiquid asset classes, up from 5%. Ms. Halvarsson said illiquid investments compensate for a lower anticipated return on some listed assets and help diversify the portfolio further.
Source Pensions&Investments