Icelandic pension fund Almenni-Lífsverk has reported positive returns across all of its investment options in the first half of 2026 despite continued volatility in global financial markets, with international equities driving performance.

The fund's balanced investment portfolios, which invest across bonds, equities and deposits, returned between 4.4 and 5.1 per cent during the first six months of the year.

Its International Securities Portfolio was the strongest performer, delivering a return of 5.8 per cent, while the Deposit Portfolio returned 4.8 per cent, the Bond Portfolio gained 4.4 per cent and the Government Portfolio returned 3.9 per cent.

Almenni-Lífsverk, which was created at the start of 2026 following a merger, said international equity markets led gains during the period, supported by relatively strong corporate earnings and continued investment by technology companies in artificial intelligence (AI) infrastructure and equipment.

In contrast, Iceland's domestic equity market came under pressure from persistently high interest rates and uncertainty over economic growth prospects.

The MSCI World Index rose 9.7 per cent in US dollar terms during the first half of the year, equivalent to a 10.7 per cent increase in Icelandic krona, after rebounding more than 16 per cent from its low at the end of March.

The fund noted that AI remained a key investment theme throughout the period, citing continued investment by technology companies alongside expectations that leading AI firms could list on public markets in the coming months.

Meanwhile, Iceland's main domestic equity index fell 4 per cent during the first half of the year as persistent inflation and changing interest rate expectations weighed on investor sentiment, although some sectors, including seafood companies, recorded gains following strong earnings.

The Central Bank of Iceland raised its policy rate twice during the first half of the year, increasing it by a total of 0.5 percentage points to 7.75 per cent. Rising bond yields reduced the value of existing government bonds, although inflation-linked bonds continued to generate positive returns.

Looking ahead, Almenni-Lífsverk said uncertainty surrounding global trade, inflation, interest rates and geopolitical conflicts was likely to keep markets volatile. It reiterated the importance of maintaining a long-term investment strategy based on diversified portfolios to help manage risk.

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