Sweden’s pension buffer funds have reported mixed results for the first half of 2025, as while most delivered positive returns despite recent turbulent markets, the Seventh AP Fund (AP7) posted a negative return of -3.7 per cent.

The first AP Fund (AP1) delivered a return of 0.6 per cent, equivalent to SEK 2.7bn, despite what it described as a “challenging” market climate.

As a result, the fund exceeded its long-term target of a 3.0 per cent real return over rolling ten-year periods, achieving 3.9 per cent for the most recent period.

All asset classes contributed positively to the result, with several anticipatory measures taken at the beginning of this period to help protect the scheme ahead of the expected market volatility.

In particular, the fund increased its currency hedging to protect the return on foreign assets as the krona strengthened, which proved effective and helped to counteract an otherwise negative impact on the result.

In addition to this, the fund cut its exposure to North American equities in favor of European equities and trimmed its holdings in long-dated US government bonds ahead of US President Donald Trump's tariffs.

AP3 also reported a positive return of 0.7 per cent after costs, having taken similar measures to protect the fund ahead of market changes.

AP3 CEO, Staffan Hansén, confirmed that the fund reduced its equity weighting ahead of “Liberation Day” on April 2, which provided cushioning during the sharp falls on the stock markets. The equity share was then later increased again as conditions stabilised.

Currency hedging measures, however, proved less effective, as Hansén confirmed that the strengthening of the krona had the largest negative impact on the return as the value of AP3's foreign investments decreased in Swedish kronor.

In addition to this, he confirmed that whilst the return on the fund's portfolio of real estate, unlisted shares, infrastructure and forestry was positive, it was not in line with expectations.

Sweden’s Second AP Fund also reported a 0.4 per cent return after costs in the first half of 2025, equating to SEK 1.6bn.

By contrast, AP7 revealed that its total return for the first half of the year was -3.7 per cent, with the majority of savers in the pre-selection of AP7 Såfa, a default option consisting of the AP7 Equity Fund and AP7 Fixed Income Fund.  

Although the AP7 Fixed Income Fund had a positive return of 2.7 per cent in H1 as a result of falling interest rates, the AP7 Equity Fund fell by -4.3 per cent, which more than offset these gains.

The fall in the equity fund was primarily sparked by Trump's tariffs, and whilst the fund clarified that this decline has now largely been recovered, it also significantly impacted by the strengthening of the krona against the dollar and other currencies, which deviated from historical movements in periods of global turbulence.

However, AP7 reassured members that, although it will only be able to confirm the impact on pensioners' payments when it is looking at the full year, the market turbulence is expected to have a limited impact.

Given the period of turbulence, AP7 CEO, Pål Bergström, also said that it is "more important than usual to look up and see the long-term perspectives".

"The progress we have seen during the first half of the year makes it clear, above all, the importance of a long-term perspective when managing savers' pension capital," he continued.

"As a long-term manager, it is difficult to add value by trying to adapt the portfolio for short-term fluctuations in the short term, and one must therefore accept that good years can be followed by weaker ones."

Indeed, he pointed out that , during the first 25 years, AP7's return has amounted to 594 percent and AP7's average capital-weighted return during the same period was 10.8 percent per year.

"Our main focus must, even in turbulent times, be the development work required to ensure that AP7 and the pre-selection in the premium pension continue to be a safe alternative that creates long-term value for our savers for another 25 years – and longer than that," Bergström stated.

Alongside the financial results, the buffer funds confirmed that work to implement the Riksdag's decision to consolidate the AP funds from five to three are "on track", with operations for AP1 set to cease at the end of the year. 

"The work to implement an orderly handover to the Third and Fourth AP Funds is ongoing according to plan," AP1 stated, confirming that "extensive preparations" are being taken to ensure it meets the government timeframe, with some of this work now in the execution phase.

The fund confirmed it will retain full responsibility for its portfolio until year-end and is ensuring a smooth handover to the receiving funds, including information sharing with external managers and companies.

Commenting on the changes, AP1 CEO, Kristin Magnusson Bernard, said: "As an employer, we support our employees in the transition to new stages in working life after the turn of the year and we attach great importance to maintaining our strong community throughout.

"I am very grateful for the way in which our employees have addressed the current situation and for the great commitment, responsibility and decisiveness they have shown.

"We have been given a very complex and challenging task to solve together, and thanks to everyone's good mood, open communication and ability to take advantage of each other's experiences and expertise, I am convinced that we will find the best path to a good conclusion.

Broader changes are also underway, as AP3 confirmed that, in collaboration with AP4, it has been working on the implementation of a new, cloud-based portfolio system, which is set to be put into use during the autumn.

The fund is also advancing its use of AI, aiming to enhance decision-making, strengthen risk management and free up resources for more value-creating work.

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