The Swedish Pensions Agency (Pensionsmyndigheten) has unveiled its first investment in real estate – broadening the asset mix of the main pension portfolio it manages from bonds and equities.
The agency announced it made a SEK1bn (€98m) equity investment in Swedish residential real estate company Heimstaden Bostad for its main investment portfolio - the so-called traditional insurance portfolio it runs as a payment option in the country’s first-pillar premium pension system.
Malmö-headquartered Heimstaden owns about 110,000 homes worth SEK170bn.
It is because the pension portfolio has now grown to SEK51bn that the Swedish Pensions Agency decided to add a third asset class to the allocation, the agency told IPE Real Assets.
Erik Fransson, head of the fund market department at the agency said: “Since the portfolio has reached this size we want to have less volatility.”
He said: “By investing part of the assets in properties, which have a more stable value, the portfolio’s return develops more evenly.”
Fransson said the agency’s target allocation for real estate is 10% of the equity portfolio, within the overall traditional insurance portfolio. The 10% of the equity portfolio amounts to around £200m (€233m) today, he said.
“At present, we have 5% invested,” he said, adding that there was no strict deadline for meeting the 10% target.
“Quality is more important than time,” he said.
“Our present focus is residential property and preferably, where we are able, to co-invest with other professional investors,” Fransson said, adding that funds would be avoided because they involved an extra layer of fees.
Asked which real estate sectors and locations the agency would target, Fransson said: “We’re looking for Swedish companies, but also interested in Germany, the Czech Republic and the Nordics - and mainly residential because it is low-risk.”
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