SWEDEN – Sweden's AP3 has bought more than 70 local retail properties from Axa Real Estate for SEK1bn (€118m) the day after announcing returns of 14.8% on its real estate portfolio.
According to the buffer fund's annual results for 2012, assets under management rose to an all-time high of SEK233bn over the past year, aided mainly by a 17.4% return on its equity holdings, which resulted in a 10.7% overall return.
Fund chief executive Kerstin Hessius said the investment team continued to consider new investment approaches, including the launch of a new risk class – volatility.
"Our volatility strategies yielded excellent returns and helped to diversify the portfolio," she said.
In the annual report, the fund contrasted strong equity performance, comprising 8.8 percentage points of its total investment return, with a loss of 10.3% in the same asset class over 2011, and said that the second-strongest returns were posted by its real estate holdings.
However, the 14.8% return from property was 0.2 percentage points down compared with 2011 and followed a year when AP3 allocated heavily to property and other real assets – including infrastructure and timberland, as well as buying out joint venture partner Kungsleden's stake in social infrastructure company Hemsö.
The fund also confirmed that its 25% stake in a €1.3bn portfolio of German residential real estate bought by Patrizia early last year cost SEK1.3bn.
It added that SEK7.5bn of investment in domestic real estate had last year seen it become the largest net investor in Swedish property – a trend set to continue as the fund acquired a portfolio of 72 retail units from French manager Axa for SEK1bn.
Axa said the portfolio of largely food retail units was spread out across the country, offering AP3 "geographic diversification benefits as well as direct exposure to the well-performing food retail sector".
It added that around 80% of the space was let to large local retailers, offering the fund tenants "excellent" covenants.
Henrik Bastman, Axa Real Estate's head of asset management for the Nordics, said: "This comes at a time where state and private pension funds in Sweden, and across Europe as a whole, are increasingly looking towards the secure and stable cash flows provided by defensive real estate assets in order to meet their liability-matching needs."
Bengt Hellstrom, head of alternatives at AP3, said the investment would provide "good stable returns" and act as a diversifier for its real estate holdings.