SWEDEN - Poor annual returns and a falling stock market do not seem to have stopped Sweden's institutional investors from maintaining a home bias in their equity portfolios.
At its lowest point on 11 February, the index fell as low as 905 wiping out the spectacular gains pension funds invested in domestic equities had made in the first half of 2007.
Gunnar Balsvik, president, Kåpan Pensioner, told Global Pensions: "We have had a terrible January. Those funds over exposed to Swedish markets would have been hit hard and there are quite a few investors which have a home bias.
"Unlisted assets and emerging market equities have, however, done reasonably well and provided some compensation."
Balsvik said the Swedish markets had begun to rally towards the end of the February.
In January, the seventh AP fund, AP7, announced it had appointed Danske Bank and Carnegie to new Swedish equities mandates worth SEK2bn (US$316m) each. The fund has also taken on a further mandate to be managed by its internal team for the same asset class.
Richard Grotthiem, CEO, AP7, said the fund had not been particularly hit by the credit crunch as it had limited exposure to domestic equities, preferring instead government and index-linked bonds.
Both managers highlighted how diversification had protected their funds from greater damage.
The situation Swedish pension funds have found themselves in has changed rapidly since June 2007.
For the first half of 2007, the fourth AP fund, AP4, saw Swedish equities which made up 19% of the portfolio return 14.7% helping to raise the fund value to SEK214.2bn.
By the end of 2007, this same section of the fund's portfolio had produced a negative annual return of -0.1% dragging the AP4 back to SEK207.3bn.
Mats Andersson, CEO, AP4, said the fund's returns for 2007 had been disappointing, but maintained the departure of two of the heads of the fund's investment team had been their own decision.
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