Sweden’s biggest pension fund has expressed disappointment at its own investment returns for the first half of this year after its allocation to pharmaceutical equities dragged on performance.

In its interim report for the first half of 2018, Alecta, which manages private sector occupational schemes, emphasised its higher longer-term performance.

The pension fund’s defined contribution (DC) and defined benefit (DB) schemes returned 2.1% and 1.7% respectively in the January-to-June period, down from 5.8% and 4% in the same period last year.

Magnus Billing, the firm’s chief executive, said: “Given Alecta’s very long-term business the key figures for the latest five-year period are the most interesting, and for those we did somewhat better than the Swedish and international benchmark we measure ourselves against.”

However, he added: “We have higher expectations for ourselves than what we actually delivered in terms of return in the first half.”

The DC product Alecta Optimal Pension returned an average 10.2% a year over the last five years, down from 12.1% at the end of June 2017. The DB scheme made a 7.8% return over the period, down from 8.8% when measured at the same point last year, according to the interim report.

The pension fund explained that, in the first half of this year, it had a high allocation to pharmaceutical stocks, which had not developed as positively as other sectors. Its underweight position in oil-related shares compared to the benchmark index had also had a negative impact on performance.

Group total assets rose to SEK260.6bn (€25.4bn) at the end of June from SEK255.8bn at the end of December.

Billing hailed his firm’s success in the recent bidding process through Collectum, the administrator of Sweden’s supplementary private-sector occupational pension (ITP), which saw Alecta winning new five-year contracts within the plan, including the renewal of its contract as default provider within traditional insurance.

The procurement process led to Alecta reducing its fee further to 0.09% for ITP members, lowering the fee ceiling to SEK600 from SEK900 and strengthening the guarantee, Billing said.

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