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AP7 tenders equity mandates worth 90% of buffer fund's value

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AP7, the SEK253bn (€26.8bn) national buffer fund for Sweden, has tendered three global equity mandates worth more than 90% of the fund’s assets.

The fund currently has SEK235.7bn invested in high-risk global equities and SEK17.5bn in low-risk Swedish fixed income.

However, the fund has now tendered a SEK238bn global equities mandate and said it would appoint three managers to operate the lion’s share of its assets.

The tender process, handled by UK consultancy bfinance, said the fund was looking for asset managers to run a passive global equity strategy in three segregated mandates, running for a period of three years, with two optional two-year extensions.

AP7 said it would select managers based on organisation and asset-class expertise, product suitability, quality track record and risk and performance.

The buffer fund is currently 51% invested in North American stocks, with less than one-quarter in Europe excluding Sweden.

Returns at the fund since inception until June 2014 has been 9.4% on an annualised basis.

In a recent interview with IPE, Anette Dahlberg, portfolio manager at the fund, said the external managers deployed by AP7 were for long/short equity and currency strategies, with an absolute return target and allocated risk budget.

“We evaluate all managers, taking into account the importance of a long-term approach in asset management,” she said.

“A manager can underperform as long as it is a reasonable part of the manager’s investment process and within the allocated risk budget.

“In monitoring managers, we follow a strict process, with regular meetings. But there will be further discussion depending on the performance of the mandate and use of the risk budget.

“If the risk budget is fully consumed by the manager, the mandate is closed down.”

Click here to read more on Anette Dahlberg’s approach to managing under-performance

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