AP2, Gothenburg, Sweden, recorded a -5.1% investment return for the six months ended June 30, with assets falling 6.1% over the period to 357.9 billion Swedish kronor ($38.4 billion).
The investment return was equivalent to a 19.3 billion kronor loss, a financial update Tuesday said. That compared to a 10.7% or 35.6 billion kronor return for the six months ended June 30, 2019. Assets fell 2.6% over the year.
The pension fund's 31.9% allocation to alternatives, which includes Chinese domestic equities, real estate, private equity, alternative risk premium and alternative credit, recorded a -2.7% return.
Foreign equities, which made up 20.8% of the portfolio, returned -11.4%, while the 9.2% allocation to Swedish equities returned -5.5%. Emerging markets equities, at 9.8% of the portfolio, returned -15.5%.
The remainder of the portfolio was invested in fixed-income assets. The 8.8% allocation to foreign credit gained 3.1%, a 6.3% allocation to Swedish fixed income gained 1%, a 3.6% allocation to foreign government bonds gained 4.5% and a 2.7% allocation to green bonds gained 2.2%. Emerging markets debt, with a 6.9% exposure, returned -5.5% for the six months ended June 30.
"The global outbreak of COVID-19 has impacted very strongly on the world's securities markets trend and thereby the fund's portfolio value," Eva Halvarsson, CEO of AP2, said in a news release.
The pension fund also published a separate sustainability report for the first half of the year.
"During the first half of 2020, the fund's sustainability work was impacted to a certain extent by COVID-19, which mainly affected attendance at general meetings, but also proposals for dividends and board fees," Ms. Halvarsson said in a separate news release.
At the end of 2019 executives decided to invest in sustainable infrastructure and completed two investments in the first six months of this year. AP2's equity portfolio carbon footprint also continued to decrease, "mainly due to reductions in emerging markets," the report said. Portfolio-weighted carbon intensity fell by 15%.
This year, executives at the fund will increase voting power to cover 1,000 companies, up from 750. In the first half of the year AP2 voted at 844 foreign general meetings and 92 Swedish general meetings.
