GFC fallout hits funds as AP2 reports losses

Andra AP-fonden, Sweden’s Second Swedish National Pension Fund (AP2) has taken a big hit from the turmoil in global markets, its capital value falling by SEK55.1 billion ($US6.6 billion) in 2008.

AP2 blamed “the sharp decline of the world’s stock markets in 2008″ after the fund returned -24 per cent and its asset value fell from SEK227.5 billion to SEK173.3 billion.

During the year, the fund reported a net inflow of SEK0.9 billion, so the net loss for the year was SEK55.1 billion.

The fund admitted the poor performance of the equities portfolios had the greatest impact on the net result.

Swedish equities returned -42 per cent in 2008, while foreign equities returned -29.5 per cent.

“This is without doubt one of the most serious financial crises since the 1930s,” says Eva Halvarsson, chief executive officer of AP2.

“In spite of deciding to reduce risk in the equity portfolios under in-house management, to reduce the scale of our positions in fixed income and exchange-market securities and to cancel a number of investment strategies completely, the decline in market worth was still substantial.”

Overall, market-quoted assets, excluding commission fees and operating expenses, posted a relative return of -1.8 per cent.

“This weak result is attributable to a number of the fund’s different equity mandates and some OTC-products that were poorly positioned in the period of extreme turbulence experienced by the financial market during the autumn,” the fund said.

“Furthermore, as a result of the financial crisis, almost all active investment mandates, in-house and external, underperformed simultaneously.”

Fixed income assets faired best with a return of 16.6 per cent, while alternative investments returned -1.9 per cent.

AP2’s return on unquoted holdings was -1.9 per cent, which included real estate and private equity funds.