Sweden's biggest pension fund, Alecta, sold all of its shares in struggling U.S. lender First Republic Bank at a loss of 7.5 billion Swedish kronor ($728 million), according to Chief Executive Officer Magnus Billing.
"The uncertainty about the bank's future was too great, partly due to the fact that the lender was downgraded to junk status," Mr. Billing said in emailed comments, after Bloomberg News obtained a copy of a written response by Alecta to the Swedish Financial Supervisory Authority.
In the document, Alecta said its total invested capital in First Republic stood at 9.7 billion kronor "before a sale on March 15." The Swedish fund had been buying First Republic shares since 2019, making it the bank's fifth biggest shareholder.
The financial watchdog had demanded an explanation as to how and why a pension company managing the money of 2.6 million Swedes invested about 21.8 billion kronor of its funds in three niche U.S. banks tied to the collapse of Silicon Valley Bank.
The fund last week said it expects to completely write off its investments in SVB and Signature Bank — at a cost of $1.1 billion — and added that there's a risk its investment in First Republic "will also be completely lost."
The scale of the losses at Alecta sparked an outcry in Sweden and prompted an internal investigation at the Stockholm-based pension fund, as well a summons from the FSA. Both the country's government and central bank said they are monitoring the situation closely but played down the risk of a disruption to financial stability.
With 1.2 trillion kronor of assets under management, Alecta said its U.S. bank losses won't impact its solvency ratio, which totaled 218% at the end of 2022.