SWEDEN - Första AP-fonden, (AP1), the first Swedish national pension fund, outperformed its strategic benchmark in 2007, following net returns of 4.6%.
Figures from its 2007 annual report revealed the 'buffer' fund had outpaced the benchmark return by 0.5% annually over the past five years, as it posted net investment income of SEK 9.7bn (€1bn), of which SEK 900m resulted from active returns.
AP1 delivered a total return of 4.8%, or 4.6% after expenses, following "healthy returns" from its 39% allocation to its fixed-income portfolio and its 59% share in foreign equity investments, particularly through holdings in emerging markets stocks.
As a result, net assets under management increased SEK 11.9bn to SEK 218.8bn (€23.5bn), while the five-year annualised return on net assets after expenses was 11.7%, which the fund confirmed it was "well above" the estimated required return needed to ensure the long-term stability of the Swedish pension system.
William af Sandeberg, the current managing director of AP1 until Johan Magnusson takes over on March 1, said the fund had "once again outperformed our strategic benchmark, in the past year, mainly thanks to our in-house fixed-income and equity management".
"We have also achieved our goal to outpace the benchmark return by 0.5 percentage points annually over the past five years. All in all, this means that our active asset management has contributed an additional SEK 4bn to the pension system since 2003," he added.
Meanwhile, the third Swedish National Pension Fund (AP3) also reported an increase in fund capital of SEK 12.7bn during 2007, bringing the total value of the fund's capital to SEK 224.9bn (€24.2bn) by the end of December.
Figures from AP3's 2007 annual report revealed a net profit of SEK 10.7bn, equating to a net return of 5%, of which 3.6% resulted from the fund's listed portfolio, while alternative investments delivered 1.2% and strategic allocation contributed 0.5%.
Although the buffer fund confirmed active return, or outperformance of the index, actually reduced returns by 30 basis points, while the fund's currency exposure reached 9% by December 31 2007.
Kerstin Hessius, chief executive of AP3, claimed the fund's "highly-diversified portfolio and asset management expertise" were "vital" for securing good returns in a year that saw "major revaluations on the financial markets" and a sharp rise in risks during the second half.
"During the year we restructured the portfolio structure in line with our strategy of making decisions on market exposure (beta) independent from decisions on active positions (alpha)," she said.
"This restructuring is now well-advanced and has already delivered results, with our medium-term and active overlay mandates generating significant excess returns during the 12 months. Also, our investments in real estate, private equity and emerging market equities all made positive contributions," added Hessius.
The 2007 annual reports for both AP1 and AP3 are available in Swedish, although the full English versions will not be available until mid-March.
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