Swedish buffer fund AP4 made a 10% return on its investments in 2016 with real estate contributing a gain of more than 25%.
Its overall annual return compares with a 6.8% gain in 2015.
Real estate was the stand-out strongest performing asset class for AP4 in 2016, producing 25.9% in returns before costs, followed by Swedish equities with a 12.4% return.
Real estate accounts for 7% of the overall portfolio, and Swedish equities make up 19%.
Meanwhile, global shares – which make up 39% of AP4’s total portfolio – returned 7.3%, and fixed-income investments generated 2.0%.
Niklas Ekvall, chief executive, said AP4’s historical results were largely due to the ability its mandate gave it to exploit degrees of freedom – particularly relating to its long investment horizon.
“AP4 intends to further intensify its ambition to establish an investment philosophy and build an investment portfolio that takes full advantage of the opportunities that our mandate and mission offers,” he said.
Among other things, the pension fund would try to strengthen its global grip on the overall portfolio and broaden its expertise in order to become more able to generate investment opportunities with a long or medium time horizon, Ekvall wrote in AP4’s annual report.
The buffer fund said it had commissioned a report by independent consultants CEM into the cost effectiveness of its operations compared to those of peers internationally.
“The result shows that AP4’s capital is managed at a significantly lower cost than the average for comparable pension funds globally,” Ekvall said.
The pension fund reported that its fund capital increased to SEK334bn (€35.3bn) by the end of December, up from SEK310bn at the same point 12 months earlier.
Over the past 10 years, AP4 averaged a 6.7% annual return after expenses. Adjusted for inflation, this equated to a real return of 5.5% above the fund’s long-term target of 4.5%.
In 2016, AP4 paid out SEK6.6bn net of fund capital as a contribution to the national pension system, to cover the deficit between payments and receipts.