AP1, Stockholm, reported a net return of -0.7% for the year ended Dec. 31, with assets declining to 324 billion Swedish kronor ($36.1 billion).
The pension fund's benchmark returned 4%.
The pension fund said in an update Friday that the return equated to a loss of 2.07 billion kronor. For the 12 months ended Dec. 31, 2017, the fund returned 9.6%.
Assets fell 2.7% compared with Dec. 31, 2017.
AP1 achieved a five-year annualized return of 7.2%, and 8.6% for the 10 years ended Dec. 31.
"We are exceeding our long-term goal by a good margin," CEO Johan Magnusson said in a news release accompanying the update. "For the individual year 2018, the result was in line with our expectations. Real estate and private equity funds developed positively. Equities generally performed poorly, including on emerging markets and in our quantitative portfolio management."
Mr. Magnusson added: "For several years now, we have been saying that the extremely favorable returns on the financial markets are not sustainable in the long term. We can now see signs that conditions are changing, and we therefore anticipate a growing challenge in terms of achieving our real return target of 4%."
The pension fund's 34.1% equities allocation returned -7.8%, while Swedish equities, which made up 11.2% of the allocation, returned -7.1%.
On the fixed-income side, the 33.3% allocation lost 0.67% for the 12-month period.
A 14.3% allocation to real estate returned 16.7%, while 3.7% exposure to infrastructure gained 4.65%. Further details could not be learned.
Separately AP6, Stockholm, reported a net return of 9.6% for the year ended Dec. 31, with assets increasing to 34.7 billion kronor.
No benchmark returns was provided.
AP6 said in a separate update Friday that the return equated to a gain of 3 billion kronor. For the 12 months ended Dec. 31, 2017, the fund returned 12.3%.
Assets increased 9.8% vs. Dec. 31, 2017.
AP6 achieved a five-year annualized return of 13.2% and a 10-year annualized return of 7.8%.
"The return generated this year is a result of our dedicated efforts in recent years to engage with funds that have the highest return in subsegments and geographic locations that are relevant for AP6," said Karl Swartling, managing director of AP6, in a news release accompanying the update. "Like before, these collaborations have resulted in interesting opportunities for making direct investments in unlisted companies. On the whole, the investment rate, both for commitments to funds and via direct investments, remained high."