AP1 awards risk mandate to managing director
The move comes as the SEK156.8bn (€17.3bn) scheme says it aims to generate an active return by diverging from the composition of the strategic benchmark.
“In order to exploit market movements and generate active returns above benchmark, the board has delegated a risk mandate to the managing director,” Första AP-fonden said in its 2004 annual report.
“This mandate provides scope for reallocation between and within various asset classes, position taking in foreign currencies and allocation between internally and externally managed assets.”
The next stage sees Af Sandberg delegating to internal and external portfolio managers “who then allocate risks with the help of an income and risk budgeting process”.
“Our basic strategy has been largely realized and the ambition for 2005 is clear – to increase active risk,” af Sandberg says in the 68-page report.
The report said AP1’s equities portfolio returned 15.5%, while fixed income returned 6.9%. Equities, but not bonds, outperformed their benchmark.
Tactical asset allocation “posted excellent results to which both discretionary and quantitative management made a positive contribution”.
But strategic asset allocation and fixed income “fell short of their goals and reported negative returns, largely due to the failure of US interest rates to rise during the year as we anticipated”.
AP1 added that it has set a new operating unit to supervise its external management mandates.
It expects to procure private equity managers in the spring of 2005 – and that the asset class will grow to 2–3% of the total portfolio in the next three years.
The scheme added that it would also “explore the opportunities” to appoint active equity managers for emerging markets.