Pension survey: Nordic funds post best property returns

Nordic pension funds reported the strongest returns on real estate in 2013 compared to the rest of their European peers, according to a survey conducted by PropertyEU Research.

The survey examined some 50 funds which had total property holdings of €167 bn, equating to 7.6% of their combined investment assets of €2.2 tln. Of these, 38 funds, with total real estate assets of €150 bn, reported real estate returns for 2013. Their real estate investment strategies are a wide mix of direct, joint ventures, non-listed funds and listed property equities.

The star performers were Sweden's state-owned AP national pension funds, mainly due to the performance of their investments in major Swedish property companies. The fourth AP fund came top overall, booking a return of 27.20% on its SEK 15 bn (€1.7 bn at end-2013) real estate holdings.

AP funds 1 to 4 each hold a 25% stake in Vasakronan, Sweden's largest commercial property landlord with SEK 80 bn in assets at end-2013. AP4, along with Swedish private pension fund AMF, own 50% each in Rikshem, the owner of SEK 20 bn of Swedish residential buildings let largely to municipalities.

Other real estate investments held by AP4 include ASE which invests in UK commercial property and Hemfosa, a company that owned SEK 15 bn of Swedish property at end-2013.

RETURN LEADERS
AP4's sister funds all turned in strong performances for last year. AP3 and AP1 were the number two and three performers with returns of 19.90% and 19.20%. AP2 saw a return of 14.40% on its property investments, putting it in fifth place behind Finnish pension fund Fennia (now part of the Elo group) which posted a property return of 14.90%.

BP Pension Scheme and Norway's giant Government Pension Fund Global were ranked in sixth and seventh position, with real estate returns of 12.10% and 11.80% respectively. The UK's Railway Pension Scheme booked 11.50% on its €2 bn property portfolio.

The final two spots in the top-10 went to the Swedes again: Alecta recorded a real estate return of 10.90%, while AMF returned 8.40%.

LOWER RETURNS
Ironically, the lower end of the ranking is dominated by the Dutch funds, collectively one of the largest pension pools in Europe (€680 bn), of which roughly 10% or €67 bn is in real estate. The best Dutch performers were Pensioenfonds Zorg en Welzijn (PZW) with a return of 7.70% and the pension fund for KLM cabin crew came in at 7.00%.

But 10 other Dutch funds, good for €50 bn in real estate investment, managed results from 3.30% to minus 5.98% for the retail sector pension fund. ABP, the €323 bn civil service pension giant, is one of the largest pension fund investors in global real estate. It had €32 bn in real estate at end-2013 which yielded a return of 1.30%, just under the benchmark of 1.50%.

See more on the pension funds and their real estate investments in Top 100 Investors, published in October 2014