Sweden's AP1 limits losses in H1'20
Swedish public pension fund AP1, which will welcome Kirstin Magnusson Bernard as new chief executive officer in August, has recorded a negative performance in the first half of 2020. The fund returned -1.8% over the period corresponding to a SEK 6.6bn (€644m) loss after expenses while its average 10-year annual real return after expenses stood at 6.7% as of end June 2020.
The Swedish institutional investor's assets under management slumped to SEK 355bn (€34.6bn) as of 30 June 2020 from SEK 365.8bn (€35.7bn) at the end of December 2019 but are still higher than those recorded in June 2019 (SEK 352bn). However outflows kept pursuing for the Swedish public pension fund as it suffered a net SEK 4.2bn (€410m) redemption in H1'20 that followed net withdrawals of SEK 9.5bn (€927m) seen in 2019.
In the first six months of the year, AP1 posted negative returns in alternative strategies (-8.1%), infrastructure (-7.9%), high yield fixed income (-6%) and hedge funds (-2.5%). AP1's equity bucket yielded -5.9% with developed and emerging markets pockets returning - 8.1% and -10.5% respectively while Swedish stocks were more resilient (-0.5%). Returns were positive in fixed income (4.6%), private equity (5.8%), real estate (1.1%) and cash (2.6%). A main change in the fund's allocation during the first half of the year was the rise in equity exposure (from 36.3% to 41.7%), in particular in Swedish and developed markets stocks, whereas fixed income's allocation was trimmed slightly (from 32.3% to 29.3%). In addition, AP1 cut investments in alternative strategies.
AP1's active CEO Teresa Isele commented: “For a while we have judged that the prospect of continued growth was poor, and we were positioned for a downturn in the market. Consequently, we went into the crisis with relatively low risk, and were also able to increase our exposure to equities before the markets gradually recovered. Some parts of the portfolio showed excellent returns, such as the Swedish small cap portfolio, and a favourable position in our fixed income investments.
“Our assessment at this point, however, is that there is some cause for concern in the shape of the pandemic’s uncertain development and its political consequences, as well as increased global tensions and potential trade disputes, combined with higher indebtedness resulting from the stimulus packages.This may have an adverse impact on the global economy in the longer term. The pandemic has not affected the Fund’s ability to deliver on its obligations to the Swedish income pension system.”
AP1 highlighted that it exerced its voting rights at 64 Swedish and 418 foreign companies between January and 31 May 2020. “During the first half-year, for example, we have backed reduced or cancelled dividend payments, and voted against higher board fees and remuneration packages that are not in line with our wishes for e.g. sufficiently high performance requirements. We have also taken part in several nomination committees where the focus has been on bringing more women onto company boards, and on proposing board members with the right expertise in greater diversity, for instance,” said Isle.