Sweden’s pension system is increasingly caught up in a property crisis that’s hit commercial landlords, with one of the state-owned pension funds joining peers that have taken losses on its investments in real estate assets.
(Bloomberg) — Sweden’s pension system is increasingly caught up in a property crisis that’s hit commercial landlords, with one of the state-owned pension funds joining peers that have taken losses on its investments in real estate assets.
Forsta AP-fonden, more commonly known as AP1, saw the value of its investments in properties shrink by 7%, or 5.2 billion kronor ($450 million) in the six months through June. Real estate assets were the biggest drag, followed by private equity funds (-0.77%) and fixed income securities (-0.35%).
“Very few transactions took place on the market during the period, leading to valuations depreciating somewhat, particularly in the Nordics,” Chief Executive Officer Kristin Magnusson Bernard said in a statement. “In markets where external valuers made larger write-downs more rapidly, such as the UK, the market seemed to stabilize faster,” she said.
Read More: Swedish Pension Fund Hit by SVB Posts Loss on Property Portfolio
The development echoes peers in Sweden. The Nordic nation’s largest private pension fund, Alecta AB, earlier this week reported a 1% loss on its alternative investments in the first half of the year — a portfolio comprising mainly real estate assets. Sharply rising funding costs have rattled Sweden’s real estate sector, where many companies have relied on cheap floating-rate bonds to finance rapid growth.
On a more positive note for the AP1, the real estate companies it owns “have retained their excellent credit ratings and continuous access to capital,” it said in the report. Strong development for equities still helped the fund generate an overall return of 6.6% after expenses.
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