SWEDEN – Tredje AP-fonden, the Third National Pension Fund or AP3, says it plans more diversity in its portfolio – including areas such as emerging markets, international real estate and infrastructure.
“During the spring AP3 decided to further diversify the portfolio,” the fund said in its half-yearly report.
“This strategy included extending the portfolio to include emerging markets, increasing exposure to international real estate and expanding alternative investments to infrastructure assets and small-cap listed research companies in the pharmaceuticals sector.
“This diversification initiative will be implemented in 2005 and 2006.”
AP3 reported a net profit of SEK 13.8 billion in the first six months – its best half-year performance since its inception in 2001. It made an investment return of 8.6%.
“Market trends have been favourable, with rising equity prices and falling interest rates, and the fund reported strong growth in capital in the first half of 2005,” said chief executive Kerstin Hessius. “AP3’s capital base has risen by close to 20% since our inception in 2001.”
She added: "It is also pleasing that our external management performed strongly and comfortably covered its costs."
It made 11 new investment undertakings in private equity in the first half, worth a total of SEK1.8bn. It said: “Private equity undertakings totalled SEK8.1bn as June 30, of which SEK2.9bn has been invested and amounted to 4.6% of AP3’s total fund capital.”
The fund made a return on its investments of 8.6% in the first half, taking its assets to SEK175.8bn, an increase of SEK15.5bn
The investment portfolio as at the end of June comprised 57 equities (including private equity), 40.7% fixed income and 2.3% real estate.
AP3 said is Swedish equity strategy – up till now a long-term view based around a limited number of stocks – was now “under review” – as it the choice of reference index.
In its revamped European portfolio, technology media and telecom investments have been increased to SEK3.5bn. It generated a first-half return of 11.3% - 2.3 percentage point above benchmark.