AP3, Stockholm, achieved a net 0.6% return in 12 months ended Dec. 31, while assets decreased by 1.3% to 340.7 billion Swedish kronor ($37.9 billion) over the year.
The fund said in an update Tuesday that the return equated to a gain of 2.2 billion kronor. That compared with a 8.8%, or 28.2 billion kronor, gain for 2017.
The five-year annualized return to Dec. 31 was 7.8%; the 10-year annualized return was 7.4%.
The fund's website showed as of Dec. 31, AP3's exposure to equities was at 128.1 billion Swedish kronor, 16% lower than a year earlier. Exposure to nominal fixed-income investments increased 3.8% to 103.9 billion kronor, while exposure to index-linked bonds increased 19.5% to 23.9 billion kronor. Allocations to real estate and infrastructure increased 16.5% to 66.4 billion kronor, while other investments amounted to 5.3 billion, up from 4.1 billion a year earlier.
As of Dec. 31, the fund reported its equity investments lost 9.8% and fixed-income investments lost 1.1%. However, inflation-linked investments gained 14.8%, while credit added 0.7%. The remaining asset classes recorded flat returns.
"I am pleased to report a positive return of 0.6% at the end of a year in which equities, our most important asset class, generated a negative contribution to total return of 4.7 percentage points. However, thanks to our real estate investments, other unlisted assets and our currency positions, we succeeded in more than offsetting this weak market return," CEO Kerstin Hessius said in a news release.
"The net result for the year highlights the importance of our long-term investment strategy comprised both of listed and unlisted assets. We therefore welcome the new investment rules that came into force in 2019 as they promote the integration of sustainable practices and portfolio diversification," Ms. Hessius said in a news release.
The new Swedish investment regulations, which became effective Jan. 1, allow Swedish funds to boost investments in unlisted assets. Funds can invest up to 40% of portfolios in illiquid asset classes, up from 5%.