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Sweden’s AP2 registers 2.9% return in first half of 2018

Gothenburg Central Train Station
Gothenburg Central Train Station

AP2, Gothenburg, Sweden, returned 2.9% for the first half of 2018, with assets increasing 1.9% in the period to 352.4 billion Swedish kronor ($38.4 billion).

An update Tuesday said the pension fund's investment return equated to a 9.8 billion kronor gain and compared with a 4.8% return for the six months ended June 30, 2017. For that period the fund returned 15.5%. Comparative figures for the six months ended Dec. 31 were not available.

The pension fund's 10-year annualized return was 6.4% for the period ended June 30.

The fund's largest portfolio exposure was to developed market equities, at 21.5%. The allocation gained 8.2% in the six months ended June 30.

A 10.2% allocation to emerging market equities gained 0.6%, while a 9.4% exposure to Swedish equities gained 6.6%.

Swedish fixed income, with an allocation of 11%, returned 0.9%; foreign credit exposure of 10.5% gained 5.6%; a 6.2% emerging market fixed-income allocation returned 2.6%; and foreign government bonds, at 4% of the portfolio, gained 7.4% for the six months ended June 30.

The fund's 1% allocation to green bonds gained 7% in the period. The remaining 26.2% of the portfolio was invested in alternative assets, which returned 7.3%.

In the first three months of 2018, AP2 introduced new benchmarks for its emerging market and developed market allocations, the update said. "The new indices compile the majority of the alternative indices to which the fund previously sought exposure in individual subportfolios, turning them into one multiple-factor index for developed countries and one for emerging countries," it said.

The new benchmarks also create exposure to a number of sustainability factors, according to the update, which AP2 said improve the expected return and risk.

"Among other things, the new indices entail a considerably lower carbon footprint," the update said.