AP2, Gothenburg, recorded a 3.5% return in 2020, bolstered by exposure to Swedish and Chinese equities.
The fund's return equated to a net gain of 12.8 billion Swedish kronor ($1.6 billion), according to its annual report. In 2019 the fund's net return was 15.9%, equating to a 53 billion kronor gain.
AP2's five-year annualized return was 7.3% as of Dec. 31, compared with 7.4% as of Dec. 31, 2019. The 10-year annualized return was 7.7%, vs. 8.4% a year previous.
Assets grew 1.3% for the year to 386.2 billion kronor.
"In many ways, 2020 was a very special year, strongly marked by the COVID-19 pandemic," Eva Halvarsson, CEO, said in a news release accompanying the annual report. "Yet in spite of everything that has been happening around the world, we have managed to deliver much of what we had decided to do. We have taken key steps to further develop our asset management approach, which we hope and believe will contribute positively to returns and to a more sustainable society."
The fund's Swedish equities portfolio, accounting for 9% of total assets as of Dec. 31, gained 15.9% in 2020, while a 2.5% allocation to China A-Shares gained 33.2%.
The remainder of the portfolio was invested in developed market equities at 21.5%, fixed income at 20.5%, real estate at 15%, emerging market equities at 10.5%, emerging market debt at 7.5%, venture capital funds at 6.5%, green bonds at 3%, alternative risk premium strategies at 2%, Chinese government bonds at 1%, and alternative credit and sustainable infrastructure at 0.5% each. Investment returns were not available for the assets.
Ms. Halvarsson added that stock-market gains driven by the technology sector "adversely affected the fund's equity portfolios, which avoid concentrating excessive holdings in large companies and instead overweight equities with low valuations. We expect this to generate a better return in relation to risk in the long run. However, it has been negative for us this year."
Executives also worked to further integrate sustainability into the portfolio. It adapted its internally managed global equities and corporate bond portfolios to align them with the Paris Agreement on climate change, resulting in a 70% reduction in the carbon footprint of the allocations vs. market-weighted indexes. The fund also developed a human-rights strategy.
