SWEDEN - Fjärde AP-Fonden (AP4), the fourth Swedish national buffer fund, failed to meet performance targets for both absolute return and active management investments during 2007.
Figures from the pension fund's 2007 annual report revealed net profit totalled SEK 4.8bn (€515m) over the year, while the total return on assets before expenses reached 2.5%, meaning total returns after operating expenses was 2.4% report.
However, the report confirmed the performance of the fund's listed equity portfolio underperformed the benchmark, with a return of just 1.8%, while the active return was -1.2% of listed assets and -1% on the total portfolio.
The fund blamed the decline on the turbulence in the credit markets and problems with active management performance, which it said has caused it to "intensify" its "change initiative".
This is the second year in a row AP4 has missed its benchmark. (See earlier IPE story: AP1 outperforms benchmark, AP4 misses it)
But AP4 pointed out it had delivered an average annual return of 11.3% over the last five years, which equates to a real annual return of 9.7%, while fund capital growth has developed well and outpaced inflation by a "good margin", to reach SEK 207.3bn (€22.2bn) at the end of 2007, around SEK 6.8bn higher than 2006.
Mats Andersson, president of AP4, admitted 2007 had been a "challenging year" as "the fund's performance is not satisfactory and we did not meet our targets for absolute return or active management".
He pointed out the improvements achieved by the fund in the first six months were "erased by the turbulence in the credit market" so that the year ended with an "unsatisfactory return of -1%".
"Absolute return from the five-year perspective is clearly acceptable. The fund's problem is that active management performance remains negative. In response to this trend, we have further intensified our change initiative," added Andersson.
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