SWEDEN - The SEK32.7bn (€3.5bn) Kåpan Pensioner scheme forgovernment employees booked a return of 2.1% for 2007, and now plans toincrease its real estate allocation to 10%.

Gunnar Balsvik,chief executive officer at Kåpan, told IPE this morning the fund's"disappointing" return was below the Swedish average for 2007 of 3.9%.

Hesaid the fund, which performed well in the first half of the year, sawresults suffer from negative markets in the second half of last year.

"We had too much credit and too much Swedish equity in the portfolio, so the return is easy to explain," said Balsvik.

Thefund attributes the investment result to its relatively largeinvestments in corporate bonds (42%) and Swedish equity (roughly halfof its 35% equity portfolio).

The bond portfolio returned next to nothing, outlined Balsvik, while the entire equity portfolio showed a return of 5%.

Balsvik added Kåpan's emerging markets portfolio, 17% of the fund's assets, outperformed its benchmark with a return of 31%.

Its timber exposure within its real estate portfolio, around 3.5% of the fund's assets, also saw good returns.

Balsviksaid the fund does not intend to make any adjustments to its asset mix,aside from increasing its allocation to real estate to up to 10%.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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