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AP2 working on new strategic portfolio

SWEDEN – Andra AP-fonden, the second Swedish buffer fund, is developing a mathematical model with a view to developing a new strategic portfolio.

“The fund has initiated cooperation with Fraunhofer Chalmers Research Center, to construct a mathematical model with a view to developing a new strategic portfolio,” AP2 said.

The Gothenburg-based Fraunhofer-Chalmers Research Centre for Industrial Mathematics is a non-profit Swedish foundation to promote mathematics in industry that was founded in 2001.

AP2 added: “The idea is to develop a model specifically for the Second AP Fund, which can contribute to a higher return on investment and promote more efficient risk utilisation.”

The move comes as the scheme made a 5.5% return – or 7.6 billion crowns - on its investments in the first half of 2004. The return takes its assets to 149.2 billion crowns, the highest sum since the fund’s inception in 2001.

The Fund’s portfolios of fixed-income instruments and Alternative Investments outperformed the benchmark portfolio, while Swedish and foreign equities underperformed slightly against benchmark.

“It has been a good six months for the Second AP Fund,” said chief executive Lars Idermark. “Compared with the average for Swedish life insurance companies, we have achieved a higher return on investment. This may be attributed to the Fund’s higher share of equities.”

The fund said its investments in hedge funds amounted to 1.4 billion crowns at the end of the first half.

“The intention is that the portfolio shall be fully invested (equal to one percent of Fund capital) during the second half of the year.”

Because the asset class was launched during the report period, the fund did not break out separate returns for hedge funds. But it said: “The performance of these investments has nevertheless been favourable since inclusion the portfolio, although they have underperformed against the benchmark index.”

AP2’s sister fund AP1 reports its first-half returns on August 20.

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