SWEDEN – Andra AP-fonden, the Second Swedish National Pension Fund, has reported a return on total assets of 17.7% in 2003 – but says it underperformed its benchmark by 0.8%.
The fund also said that it has approved a “somewhat altered” strategic portfolio for 2004 following an asset liability modelling study conducted in the second half of 2003.
AP2 said its capital assets have grown to 140.4 billion crowns (15.3 billion euros) from 117.1 billion crowns. In 2002 it posted a return of -15.3%.
“The good result is primarily attributable to retention of a high ratio of equities in the portfolio throughout 2003, at a time when the world’s leading stock markets were posting sharp increases in market rates,” said AP2 chief executive Lars Idermark.
“After three years of declining stock markets, 2003 marked something of a turnaround in the world of long-term asset management,” he added. “Maintenance of our consistent commitment to a policy of long-term investment has enabled us to report a highly satisfactory result.”
“The fund’s relative return is 0.8% lower than its reference index,” it said. Excluding operating expenses and non-liquid holdings, its return was 0.5% under the benchmark.
It said that its asset management activities in 2003 focused on active management and absolute returns. “The intention is to secure a stable return on investment and further diversification of risk.”
Towards the end of 2003, the fund set its strategic portfolio for 2004 at around 60% equities and 40% fixed-income instruments.
Following the ALM study, the fund is creating a new asset category of ‘Alternative Investments’, which comprises its investments in risk capital funds, hedge funds and real estate. It “has been assigned a clearly defined role in asset allocation”.
It also said that it postponed the award of fixed income mandates, which will be implemented in 2004.