Swedish state pension buffer fund AP4 made a 0.2% loss on its investments last year after costs, but its active management strategy meant it was able to prevent weak markets leaving more of a dent in its SEK349bn (€32.9bn) portfolio.
Releasing full-year financial figures, the fund said the return before costs was 0.1% for 2018.
Active management had contributed 2.3 percentage points to the return, it said.
Niklas Ekvall, chief executive of the fund, said: “2018 was a year with periodically high volatility and weak – and in many cases negative – returns on financial assets.
“It is therefore gratifying that AP4’s active management was very successful in 2018 and significantly limited the impact of the weak market on AP4’s total return.”
Ekvall said this illustrated the value of broad-based and high quality active management in the current low-return environment.
The pension fund made net disbursements to the pension system of SEK6.8bn during the year.
This led to total fund capital falling to SEK349.3bn by the end of December, from SEK356.6bn at the beginning of 2018.
Changes to the AP funds’ investment mandate, which took effect at the beginning of this year, have given the four buffer funds more freedom regarding their asset mixes.
However, Ekvall said in the annual report that it was “of the utmost importance” that the second step of this reform process was carried out as planned in 2019.
This next set of changes will broaden the range of investment forms and types of instruments the funds can use. It is currently going through the Swedish legislative process.
“A modernisation also in this area is therefore a prerequisite for the AP funds’ ability to purposefully and cost effectively use the greater freedom to act that the change in the first step conveys,” Ekvall said.
AP1, the fourth of the main buffer funds, is set to publish its 2018 report tomorrow.