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Impact Investing

IPE special report May 2018

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AP2 returns 4% despite losses on emerging market equities

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AP2 returned 4.1% last year, despite suffering losses exceeding 9% from its emerging market equity holdings.

Eva Halvarsson, chief executive of the Swedish buffer fund, said it was “gratifying” to see its active management generate a 0.9% outperformance over the course of the year, despite the market turbulence seen in 2015.

The fund’s emerging market equity portfolio was the worst performing asset class, losing 9.1% during 2015, followed by a 7.2% loss from emerging market fixed income.

Despite the losses from emerging market equity, Swedish equity holdings and developed market equity returned 15.2% and 9.4%, respectively.

Overseas corporate and government bonds also returned 2.1% and 3.2%, while Swedish fixed income achieved a return of 0.7%.

Across the main seven asset classes, the fund achieved a return of 2.4%, boosted to 4.1% once it taking account of its alternatives portfolio.

Alternatives – comprising property investments such as the Cityhold Office Partnership with AP1 and stakes in agricultural land, including its joint ventures with TIAA-CREF – returned 9.4%.

Halvarsson said 2015 saw its assets under management exceed SEK300bn (€32bn) for the first time – equating to total investment returns of SEK175bn since it was launched in 2001 – and welcomed that AP2 had now completed its three-year programme of bringing management of assets in-house.

The transfer of SEK50bn in mandates since 2012 now saw global credit and emerging market fixed income managed internally, the fund’s annual report said.

“The in-house management of this capital will mean a significant cost saving, while also enabling us to better utilise and develop the high levels of competence within the fund,” Halvarsson said.

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