SWEDEN - Strong returns in listed stocks and private equity pushed up total assets at both AP1 and AP3 - two of the five Swedish ‘buffer funds' - in the half year of 2007.

AP1 had a total return on its assets of 6.3%, pushing up assets under management by SEK14bn(€1.48bn) to SEK221.1bn, while AP3 saw assets grow by SEK15.5bn in the first six months to SEK227.7bn with a return of 6.8%.

"The AP3 portfolio performed favourably during the first half of the year amid continued equity market gains and rising interest rates," the fund announced this morning.

AP3's equity portfolio, worth SEK213.4, saw a total return of 6.5%, while AP1's equity holdings mirror the results, with 10.2% return on its SEK12.1bn in equities.

Both funds particularly benefited from their investments in Swedish equities, with AP1 returning 15.1% on the asset class, and AP3 13.7%.

Moreover, AP1's managing director William af Sandeberg said private equity made notable positive contributions. AP1 saw returns of on private equity, while AP3 returned 15.5%.

AP3 added it is "very satisfied" with its private equity holdings and will continue to expand in the field until it has reached 5%, the legal restriction on private equity investments.

AP3 adopted a strategy of diversifying risk across a range of assets and regions, alongside an active medium-term asset allocation which, according to AP3's chief executive Kerstin Hessius, has delivered success.

The fund started separating beta from alpha in 2006, which is still in progress, while some structural change were made in the listed portfolio, which saw some traditional mandates replaced by lower-risk mandates during the first half of 2007, said Hans Lindberg, chief strategist asset allocation at AP3.

"This second half of 2007 we will add GTAA-mandates to our portfolio. We will also finish our enhanced management procurement and include more enhanced in our equity portfolio," Lindberg told IPE today.

Moreover, the fund has said it will continue to diversify its long term portfolio, for instance by including more alternative investments.

However, "the turbulence in both the fixed income and equity markets in August naturally had an adverse impact on our investment returns, but this report relates to the period ended 30 June", said Hessius.