AP2, Gothenburg, Sweden, returned 3.7% over the six months ended June 30, 70 basis points below its benchmark, with assets climbing 2.5% to 308 billion Swedish kronor ($36.2 billion).
The pension fund said it had achieved the return despite financial markets turbulence over the period. AP2 returned 5.2% in the first half of 2015 and 4.1% in the whole of 2015. Assets increased 0.5% in the 12 months ended June 30, said a financial update.
Total returns on the pension fund’s Swedish equities allocation were -5.1% for the six months ended June 30. For the same period in 2015, Swedish equities returned 11.5%.
Non-Swedish equities retuned 4.2% in the first half of the year, vs. 9.5% the same period in 2015. Emerging market equities returned 6.7% vs. 8.6% for the same period last year.
On the fixed-income side, Swedish bonds returned 2.5%, improving on the first half 2015’s 0.2% return. The pension fund’s foreign government bonds returned 6.6% vs. 0.7% for the same time frame the previous year, while foreign credit investments returned 7.2% for the six months ended June 30, vs. 2.5% for the same period in 2015.
Emerging markets bonds returned 13.4% in the first half, compared with 1.8% in the first half of last year. AP2’s allocation to foreign green bonds, which it only started measuring April 6, returned 4% from that date through June 30.
AP2’s alternative investments, which include Chinese equities, unlisted real estate, private equity, alternative risk premiums and alternative credit, returned 5.5%, vs. 6% for the six months ended June 30, 2015.
The pension fund’s asset allocation as of June 30 was 22.6% alternatives, 22.5% foreign equities, 12.5% Swedish fixed income, 11% emerging markets equities, 10.4% foreign credit, 9.8% Swedish equities, 6.2% emerging markets bonds, 4% foreign government bonds and 1% foreign green bonds. As of June 30, 2015, the asset allocation was 23.2% foreign equities, 22.7% alternatives, 16% Swedish fixed income, 11% emerging markets equities, 9.7% Swedish equities, 6.6% foreign credit, 6% emerging markets debt and 4.8% foreign government bonds.
“The ability to generate a stable return even during uncertain times is mainly attributable to the well-diversified nature of our portfolio, both in terms of asset class and markets,” said Eva Halvarsson, CEO of AP2, in a statement accompanying the update. “Our long-term and well-diversified approach is a key factor in the fund’s success and an important contributor to its strong growth.”
In the update itself, Ms. Halvarsson said the political climate in “Great Britain is likely to remain turbulent during the autumn,” and highlighted “a risk that the imminent U.S. presidential election could have an impact on financial markets. Clearly, there are still plenty of unanswered questions. I am nevertheless confident that (AP2) continues to be well-equipped to face the future.”