Sweden’s AP4 has reported strong returns in the first half of this year — 13% after costs compared to 3.8% this time in 2018 — with the head of the Stockholm-based fund warning that these were a clear sign of continuing market volatility.

Niklas Ekvall, chief executive of the national pension buffer fund, also repeated criticism of the latest batch of government-proposed changes to the investment rules for AP4 and the other three main AP buffer funds, saying a new set of rules to give the funds enough flexibility was now urgently needed.

The 13% return was AP4’s highest return for a single first half-year since the start of the new pension system in 2001. 

Ekvall said the extent of the first half return was very gratifying. “But it illustrates perhaps above all the volatile market environment that we currently find ourselves in, and the fact that evaluation of a pension fund must be done over a long period of time in order to be meaningful,” he said in the fund’s interim results statement.

AP4’s total assets rose to SEK391.4bn (€37.1bn) at the end of June. 

The latest step in the ongoing reform of the state pension buffer funds’ investment rules was a bill published in May with the stated intention of increasing the funds’ cost efficiency and return potential and giving them the same set of options open to similar investors regarding long-term illiquid assets, while also increasing sustainability.

In the ensuing consultation the bill has been criticised by AP1-4 and other stakeholders as being too limited.

In AP4’s results statement, Ekvall said: “In its response [to the consultation], AP4 points out that the memorandum’s proposals do not go far enough to achieve the previous statement about the legislative change, and that it is urgent to now create a set of rules that give the AP Funds sufficient flexibility to be able to operate in a rapidly changing financial market for many years into the future.”

He added that the proposals, despite their intentions, did not provide the funds with similar conditions in comparison to comparable institutional investors.

AP4 reported a SEK45.2bn return between January and June, with the portfolio’s active return exceeding its benchmark by 1.7 percentage points — corresponding to a profit contribution of SEK5.8bn, it said.

The fund paid SEK3bn to the state pension system in the period, and total costs amounted to 0.1% of average assets under management, it said.

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