Swedish Pension Fund AP2 Returns 10.7% in First Half

Swedish pension fund AP2’s investment portfolio returned 10.7% after costs during the first half of 2019, raising the fund’s total asset value to SEK367.4 billion ($37.7 billion).

Although the strong performance easily surpassed the fund’s long-term assumed rate of return of 4.5% a year, it was 0.4% below that of its benchmark index, excluding alternative investments and costs.

“The beginning of 2019 saw a strong recovery in the world markets after the major downturn at the end of 2018, however, this was followed by growing concern that global real economic growth may lose momentum,”AP2 CEO Eva Halvarsson said in statement.

“This concern was amplified by uncertainties regarding Brexit and, in May and June, the escalating trade conflict between USA and China,” she added. “This political uncertainty seems to have played a part in a declining investment climate the world over.”

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The fund’s average annual real return rate over the past 10 years has been 8.1%, according to the H1 report.

The total return of the fund’s Swedish and foreign equity portfolios for the half-year was 19.8% and 21.5% respectively. Emerging-market equities increased in value by 13.9%, while Swedish fixed-income securities returned 1.1%. Emerging-market bonds , foreign credits, green bonds, and foreign government bonds returned 13.6%, 13.5%, 10.5%, and 9.9%, respectively.

Meanwhile, the fund’s alternative investments, which are made up of Chinese domestic market equities, non-listed real estate, private equity funds, alternative risk premiums, and alternative credits, returned 7.7%.

In the first half of the year the fund adjusted its listed portfolio to increase its holdings of real estate and private equity funds while reducing its allocation to Swedish and foreign equities, and Swedish bonds. It also increased its capital allocated to emerging-market bonds issued in US dollars. The fund’s board also decided that the fund will no longer invest in tobacco companies, or companies that are involved in the maintenance and modernization of nuclear weapons systems.

AP2 also completed a reorganization in the spring and the fund’s sustainability analysts are now part of the asset management’s strategy, as it looked to integrate sustainability issues into the fund’s management. During the first half of the year it voted at 74 general meetings for Swedish listed companies, and at 742 foreign general meetings, the plan said.

The asset allocation of the portfolio as of the end of June was 28.4% in alternative investments, 20.4% in developed markets equities, 10.5% in fixed-income, foreign credits; 10.4% in emerging markets equities; 9.1% in Swedish equities; 8.7% in 7.5% in fixed-income, emerging markets; 4.0% in fixed-income, foreign government bonds; and 1% in fixed-income, global green bonds.

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Tags: AP2, H1 Returns, Pension, Returns, Sweden

A UK company that managed two pension plans has been closed down by the courts after it failed to properly maintain its participants’ funds.

Ecroignard Trustees Limited, based in Preston, was shuttered by the High Court in Manchester following an investigation by government regulator the Insolvency Service.

The company was the trustee of The Uniway Systems Retirement Benefits Scheme and the Genwick Retirement Benefits Scheme. After receiving complaints, the Insolvency Service said it conducted confidential investigations into the company’s activities before uncovering several instances of misconduct.

Investigators uncovered that Ecroignard had traded with “a lack of commercial integrity,” said the Insolvency Service in a release. It said that the plans’ funds were used to invest in vehicles that were illiquid, highly risky, and not suitable for its members.

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According to the Insolvency Service, Ecroignard did not comply with statutory requirements, best practice guidance, and internal governance requirements. It also said the firm failed to ensure that the Uniway pension plan was properly diversified, and did not seek assurances that funds were put into regulated investments.

Additionally, members of the plans weren’t notified of proposed changes to their chosen investments, and weren’t able to decide how their funds should be invested.

“When people invest their pension funds as a way of planning for their futures, they don’t expect their saving pots to be put at risk,” Scott Crighton, Chief Investigator for the Insolvency Service, said in a statement. “Ecroignard’s management of the pension schemes, however, raised considerable red flags and questions remain which will need to be looked into by the Official Receiver as liquidator of the company.”

The Insolvency Service said Ecroignard “demonstrated a lack of transparency and adequate stewardship.” It also said that because the company didn’t maintain and preserve adequate books and records, its investigators were unable to determine whether all investments are accounted, and were unable to get a clear picture of members’ contributions, and which payments were from Ecroignard’s bank accounts.

It also said it had concerns that Anthony Waterfield, who is currently the official director of the company “has insufficient knowledge of Ecroignard’s trading to be able to manage the company,” adding that “he has also been unable to provide key information to investigators, such as the schemes’ assets and the status of the schemes.”

Government investigators also said that Roger Bessent appeared to still have executive authority within the company, despite having been barred for nine years in November 2017 from acting in the management of companies. They said he remained the sole signatory on the company’s bank account until at least October 2018.

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Tags: Ecroignard Trustees Limited, Genwick Retirement Benefits Scheme, Pension, UK, Uniway Systems Retirement Benefits Scheme