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Pension Funds

AP2 returns 3.6% in first 6 months of year on strong equity returns

AP2, Gothenburg, Sweden, returned 4.8% for the six months ended June 30, with assets increasing 3.6% over that period to 336.3 billion Swedish kronor ($39.5 billion).

The return was equivalent to a 15.5 billion kronor gain, said a half-year update.

Assets grew 9.2% in the year ended June 30.

The fund posted a 3.6% return for the six months ended June 30, 2016. Comparative figures for the half-year ended Dec. 31 were not available.

The five-year annualized return was 10.4%, and over 10 years was 5.3%, both as of June 30.

Total returns for the fund's Swedish equities was 9.7% for the first six months of the year, compared with -5.1% for the same period in 2016. Overseas equities delivered a 4.2% return, down from 11.5% the same period last year.

Emerging market equities returned 8.9% in the six months ended June 30, compared with 6.7% a year previous.

Swedish fixed-income securities gained 0.3%, vs. 2.5% last year; overseas government bonds returned 2.9%, down from 6.6%; and foreign credit lost 2.4%, vs. a 7.2% gain for the first half 2016.

Emerging market bonds gained 2.7%, vs. 13.4% last year; and green bonds lost 1.7%, compared with a 4% gain for the period April 6 through June 30, 2016. The green bond allocation began April 6.

The fund's alternative investments, made up of Chinese equities, unlisted real estate, private equity, alternative risk premiums and alternative credits, gained 4.6% for the first six months of 2017, vs. 5.5% for the first six months a year earlier.

The fund's asset allocation as of June 30 was 23.5% alternative investments, 21.9% overseas equities, 13.2% Swedish bonds, 10.6% emerging market equities, 10.2% overseas credit, 9.9% Swedish equities, 5.8% emerging market bonds, 3.9% overseas bonds and 1% green bonds.

Over the half-year, executives increased exposure to Swedish small-cap stocks to 2% from 1%. Exposure to Chinese equities grew to 2% from 1%, at the expense of developed market equities. Within the fund's emerging market bonds allocation in local currency, executives broadened the portfolio exposure to enable the inclusion of countries below investment grade. The fund also employed environmental, social and governance data in its active management of emerging market equities, bringing it into line with a similar model used for developed market equities, said the update.