AP4 drops 21% in 2008
SWEDEN - Fjärde AP-fonden (AP4), the Fourth Swedish National Pension Fund, saw the value of its fund capital more than SEK40bn to SEK164.7bn (€14.9bn) in 2008.
Latest figures form the pension buffer fund showed the net investment result for the fund was -21%, or -SEK43.5bn last year, as its actively-managed portfolio of liquid assets, such as equities, debt and currency, returned -22.3% before costs.
Within this, the worst performing asset class was Swedish shares with a return of -40.3%, closely followed by the global equity portfolio which yielded -39.4%, although investments in AP4's debt portfolio returned a positive 11.4% following a "dramatic fall" in interest rates.
Unquoted shares also performed poorly with a return of -33.8%, while real estate performed significantly better at -2.7%. This follows the AP fund's decision to purchase Vasakronan in July last year through their joint property arm AP-Fastigheter. (See earlier IPE article: Sweden sells E4.4bn real estate arm to AP)
Overall, the negative investment results on its actively-managed assets was 21.9% - an active negative return of 1.1% compared to its benchmark - although after the implementation of its strategic portfolio, which includes passive tactical asset allocation, the overall return was -20.8%.
AP4's objective is to create a real inflation-adjusted total return of at least 4.5% over five years, however the figures showed a total return over the last five years of an average of 2.9% a year after expenses, equivalent to an annual real return of 1.1%.
Mats Andersson, chief executive of AP4, pointed out 2008 was "in all respects an extreme year", but admitted the fund's poor performance "may be substantial and have a negative impact on pension income".
He added: "At the Fourth Swedish National Pension Fund, we will analyse the events and our internal decision-making in order to draw lessons for the future. We need to be significantly better at identifying and economically-managing the business opportunities created in the market economy system.
"Furthermore, we must dare to act independently and not follow the market's flock behaviour. This does not, however, mean that we see 2008 as a starting point to change management strategy or allocation dramatically," said Andersson.
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