SWEDEN - Alecta increased the value of its investments by SEK 6.4bn (€630m) in the first half of 2009 following an overall return of 2.2%.

Latest figures from the occupational pension provider showed its investments produced a return of 5.1% in the second quarter, bringing the first half return to 2.2% and the value of its investments to SEK 409.1bn, following a strong performance from its equity allocation.

Alecta has only returned to the equity market in recent months, after sharply cutting its exposure from 40% at the end of 2007 to 27% at the end of 2008 and again to 26% at the end of March, in favour of its fixed income portfolio.

However, its equity allocation was at 33% again by the end of June, while its exposure to bonds was at 60%, down from 67% at the end of March, with the remainder invested in real estate investments.

Figures revealed its increased equity allocation returned 13.8%, although this was offset by poor performances from its fixed income and real estate portfolios of -1.3% and -6.5% respectively.

Meanwhile Alecta's collective funding ratio - a buffer to protect against fluctuations in investment return and insurance risks - stood at 135% at the end of June, up from 122% at the end of March 2009.

This is in comparison to last year when the funding ratio dropped from 126% in September 2008 to 112% as of 31 December 2008, with the pension fund previously stating the interest rate effect on the pension liability accounted for two thirds of the deterioration of its collective funding ratio last year.

As Alecta's collective funding policy defined a normal range of 125-155%, the pension fund confirmed earlier this year it would charge the full premium on its pensions in 2009 to ensure sustainability and restore the ratio closer to the target level of 140%.

The fund had previously reduced premiums for defined benefit (DB) schemes within its ITP Plan by around 40% at the beginning of 2008 after exceeding the 140% buffer target because it wanted to avoid further surplus funding. (See earlier IPE article: Alecta drops 7.4% in 2008)

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