SWEDEN - The SEK196bn Swedish buffer fund Tredje AP-fonden, AP3, is putting an initial SEK2bn (€215m) into FTSE's new Global Wealth Allocation fundamental index.
The fund said it would enhance its asset management operations by introducing fundamental indexing as a "new form of management".
It will use the FTSE GWA fundamental index, which covers European large cap and mid cap companies including UK. The index was launched in October last year
"AP3 is the first European pension fund to adopt the GWA index," the fund said.
The initial SEK2bn portfolio will be managed internally using the FTSE GWA Europe Index based on GWA's wealth weighted methodology.
"We look continually for new sources of return and instruments to develop our asset management operations," said AP3's head of asset management Kerim Kaskal in a statement.
"Fundamental indices are ideal for AP3 as a long-term investor because they have been shown to outperform market-weighted indices over longer periods of time."
In July this year, AP3 sister fund AP2 allocated 15% of its US equity portfolio to fundamental indexation via the Research Affiliates Fundamental Index (RAFI).
Fundamental indices are not market-weighted, meaning it's not weighted according to market expectations of company performance, which proponents say captures reported fundamentals.