The specter of accelerating inflation is prompting the biggest pension manager in Sweden to cut its holdings of stocks and bonds.

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Alecta, which manages $130 billion, is instead boosting exposure to alternative assets such as infrastructure projects and residential housing in an effort to preserve returns.

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“Longer term we may see rising inflation and that is one of the reasons we are switching the portfolio towards more real assets,” Hans Sterte, the firm’s chief investment officer, said in an interview.

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In Alecta’s home market of Sweden, calls of excessive valuations are getting louder with the benchmark stock index up about 30% so far this year. Listed markets are “priced for perfection” and “everything is very expensive,” Mr. Sterte said.

His comments echo concerns from other high-profile investors such as the chief executive of Norway’s $1.4 trillion sovereign wealth fund and Scion Asset Management’s Michael Burry, who has drawn parallels between economic policy today and Germany’s during hyperinflation in the 1920s.

To guard against such risks, the Swedish pension giant is planning to increase the share of alternative assets to 20% of the total portfolio by 2024 from the current level of 12%. “We have increased real assets about 5% over the past three or four years and we intend to continue increasing,” Mr. Sterte said.

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