(March 21): Sweden’s largest pension fund, Alecta, is facing losses of almost US$2 billion as a result of a failed investment strategy that made it one of the biggest shareholders in two collapsed US banks and another that’s been caught up in the crisis.

The scale of the losses has become clearer after the private pension group sold all of its First Republic Bank stake at a loss of 7.5 billion kronor (US$728 million), according to chief executive officer Magnus Billing. That adds to the already expected losses of 8.9 billion kronor in Silicon Valley Bank and 3.2 billion kronor in Signature Bank.

“The uncertainty about First Republic’s future was too great, partly due to the fact that the lender was downgraded to junk status,” Billing said in emailed comments, after Bloomberg News obtained a copy of a written response by Alecta to the Swedish Financial Supervisory Authority.

The soured bets at Alecta — a pension fund that oversees the private savings of 2.6 million Swedes — have sparked an outcry in the Nordic country, as well as an internal investigation into its investment processes and a summons from the FSA. Both the country’s government and central bank said they are monitoring the situation closely but played down the risk of a disruption to financial stability.

“Obviously it’s a big failure for us as an investor,” Billing said last week. “We need to learn something from that and take actions based on the lessons learned.”

With 1.2 trillion kronor of assets under management, the US bank losses won’t however impact Alecta’s solvency ratio, which totalled 218% at the end of 2022.

In the document, Alecta said its total invested capital in First Republic stood at 9.7 billion kronor “before a sale on March 15”. The Swedish fund had been buying First Republic shares since 2019, making it the bank’s fifth biggest shareholder.

Alecta told the FSA that at the time of its first investment in First Republic four years ago, the bank had a sound track record of historical growth and increased profits. “We also saw that the bank had good opportunities to continue double-digit growth in coming years,” it said.

First Republic saw its shares rally in US premarket trading after closing at a record low on Monday amid a report by Bloomberg News that JPMorgan Chase CEO Jamie Dimon hatched a new plan to aid the struggling lender. The bounce to US$15 a share leaves the stock down about 87% from its price before the SVB news came out.