Sweden’s Första AP-fonden (AP1) returned -8.6 per cent on its investments last year, its 2022 annual report has revealed.

This corresponds to a result of -SEK 39.9bn as global fixed income and equity markets showed strong negative returns.

These negative returns were attributed to the outbreak of war in Europe, continued effects of the Covid-19 pandemic, high inflation and rising interest rates.

By comparison, AP1 saw a positive return on investments of 20.8 per cent in 2021.

Its ending fund capital fell from SEK 465.8bn at the end of 2021 to SEK 421.2bn at the end of last year.

AP1’s transfers to the income pension system declined from SEK 7.5bn to SEK 4.7bn.

Despite the negative return in 2022, the pension fund exceeded its medium-term target of 3 per cent real return over rolling 10-year periods, returning 5.6 per cent on average over the past 10 years.

Commenting on the report, AP1 CEO, Kristin Magnusson Bernard, noted that 2022 marked an end to the low inflation and interest rate environment that had boosted returns on financial assets since the financial crisis in 2008.

“Instead, returns on both stocks and fixed income fell simultaneously
during large parts of the year,” she continued.

“For the world's investors, it was very difficult to assess how long the changed conditions would last and market sentiment changed several times during the year.

“Against the background of the very extensive market turbulence, both the financial systems and the real economies around the world have nevertheless shown unexpectedly great and impressive resilience so far.

“We must generate a long-term high return at a well-balanced risk. In the current economic climate, AP1 has acted both short term and long term with a focus on protecting the portfolio.

“We have actively changed the positions based on changed market conditions where, among other things, the equity exposure has been lowered and the duration in the fixed income portfolio has been reduced.

“The portfolio of alternative investments that includes real estate, infrastructure and venture capital funds reports a positive return.”

AP1’s report also noted that the pension fund took further steps to achieve its goal of a net-zero portfolio by 2050.

Since adopting its target in 2019, the pension fund has reduced the carbon footprint of its listed equity portfolio by 57 per cent.

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