Norway’s municipal pensions heavyweight Kommunal Landspensjonskasse (KLP) made a 4.2% investment return between January and June, despite having written down values in its real estate portfolio after rising interest rates squeezed property prices.
Group assets rose to NOK956.3bn (€82.7bn) by the end of June. This was NOK56.2 more than at the start of the year, according to the institution, which is collectively owned by Norwegian local authorities.
Sverre Thornes, chief executive officer of the Oslo-based pensions firm, said: “Strong stock markets have contributed to a good result for KLP in the quarter, especially considering that we have adjusted down the value of our properties due to increased interest rates.”
Equities returned 11.7% in the six months in KLP’s NOK701.9bn common portfolio, with the allocation to the asset class increasing to 32.4% by the end of June from 30% at the close of 2022.
Real estate, meanwhile, ended the first half with a loss of -0.8%, with its allocation within the portfolio little changed over the six months at 14.6%.
Within equities, domestic shares performed more weakly than international shares between January and June, with the former generating a 1.6% gain and the latter returning 6.3%, KLP revealed in the interim report.
“Property values in the collective portfolio were written down by NOK2.6bn in the first half of the year,” KLP said, adding that the write downs were made because of higher return requirements due to increased interest rates.
The -0.8% loss for real estate, including Norwegian and international property funds, also took account of currency hedging, the pensions group said.
Looking ahead, KLP said: “There is still uncertainty related to the effects of the various factors that affect the property market, both interest rates, yield requirements, inflation and the cost picture.”
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