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Asset Allocation

Sweden’s AP1 Returns 11% in First Half of 2021

The $50 billion pension fund was aided by a strong Stockholm Stock Exchange.
By Michael Katz


Buoyed by one of the strongest stock markets in the world this year, Swedish pension fund AP1 reported an 11% investment return for the first half of 2021 to raise its total assets under management (AUM) to just over $50 billion.

The fund said the first half of the year was characterized by high global capital market activity and a quick economic rebound combined with strong risk appetite. The fund also reported five- and 10-year annualized returns of 10.9% and 10.4%, respectively.

“We have been well positioned to benefit from the prevailing market situation, and most asset classes in the portfolio contributed positively,” CEO Kristin Magnusson Bernard said in a statement. “Our considerable exposure to global and Swedish equities, where especially the latter have shown outstanding performance year-to-date, was the main return driver, although real estate and other alternative investments also contributed positively.”

Private equity was the top performing asset class for the fund, returning 22.8% during the first six months of 2021, followed by domestic equities and hedge funds, which returned 19.6% and 17.1%, respectively. Developed markets equities and emerging markets equities returned 13.5% and 10.8%, respectively, followed by real estate, which returned 10.6%.

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High-yield fixed income returned 2.6%, while infrastructure was up 1.3%. The only asset classes that declined during the first half were cash and fixed-income securities, which lost 5.8% and 2.4%, respectively.

In its interim 2021 report, AP1 said it is “fully focused” on using the trend of sustainable and “green” investments to achieve its objectives. This spring, the pension fund invested in Swedish battery developer and manufacturer Northvolt, along with AP2, AP3, and AP4 pension funds, for a total of $400 million. The fund also said its decision to stop investing in fossil-based holdings reduced its financial risk and reduced the carbon footprint of its equities portfolio by 46%.

“At AP1, we look forward to an exciting remainder of the year, where we aim to respond nimbly to changes in market direction while being firmly focused on our long-term mission,” Bernard said.

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Home > News > Pensions > CalSTRS Earns Record Annual Return of 27.2%
Pensions

CalSTRS Earns Record Annual Return of 27.2%

Private and public equity gains of 51.9% and 41.8% boosted the fund’s asset value to $308.6 billion.

By Michael Katz


The California State Teachers’ Retirement System (CalSTRS) reported a record 27.2% net return on investments for fiscal year 2020–21, topping its benchmark’s return of 24.98%, and easily surpassing its 7% assumed rate of return. The strong performance raised the portfolio’s total value to $308.6 billion, marking a 100% increase over the past decade alone. They were the “highest in my tenure,”  CIO Chris Ailman told this publication.

Over the long term, the fund reported 20- and 30-year annualized returns of 7.6% and 8.6%, respectively, with three-, five-, and 10-year annualized returns of 12.2%, 11.8%, and 9.7%, respectively.

“We’ve built our portfolio for long-term performance, but this year’s results were nothing short of spectacular,” Chief Investment Officer Christopher Ailman said in a statement. “These are record-breaking numbers—the highest returns we’ve seen since the late 1980s.” (In 1982, there was an accounting change that produced higher returns that were unrelated to the markets.) 

The strong annual returns for 2021 were driven by the portfolio’s private equity and public equity asset classes, which returned 51.9% and 41.8%, respectively, and beat their benchmarks’ returns of 47.8% and 41.2%, respectively. 

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Inflation-sensitive investments returned 18%, ahead of the benchmark’s 14% return, followed by innovative strategies, which earned 11.7% and more than doubled the benchmark’s 5.6% return. Real estate and risk mitigating strategies returned 7.4% and 6.3%, respectively, surpassing their benchmarks’ returns of 1.5% and 5.5%, respectively, while fixed income returned 1.2%, ahead of its benchmark’s return of 0.4%.

As of June 30, the asset allocation of CalSTRS’ investment portfolio was 49.7% in public equity, 12.3% in real estate, 12% in private equity, 10.4% in fixed income, 8.6% in risk mitigating strategies, 3.7% in inflation sensitive, 2.8% in strategic overlay and cash, and 0.5% in innovative strategies.

Pension funds with fiscal years that end March 31 or June 30 have reported outsized returns in large part because those results didn’t include the period when the global markets crashed and then rebounded in early 2020 in response to the outbreak of the COVID-19 pandemic.

For example, the California Public Employees’ Retirement System (CalPERS), which also ends its fiscal year June 30, reported a preliminary 21.3% net return on investments, and Japan’s Government Pension Investment Fund (GPIF), whose fiscal year ends March 31, reported a record 25% return.

Meanwhile, the Massachusetts Pension Reserves Investment Trust (PRIT) and the Pennsylvania State Employees’ Retirement System (Penn SERS), had calendar year Dec. 31 returns of 12.6% and 11.1%, respectively. They were hit by the market crash, but were still able to earn double-digit gains thanks to a strong rebound. However, the Texas Association of Public Employee Retirement Systems, which reports for the year ended Sept. 30, filed before the rebound and reported an average return of 4.6%.

Related Stories:

Penn SERS Returns 11.1% in 2020

Japan’s $1.7 Trillion Pension Giant Breaks Record, Returns 25% in 2020

Massachusetts Pension Fund Returns 12.6% in 2020, Hits Record Asset Value

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