SWEDEN - AP6, one of the Swedish national buffer funds, returned 11.3% for the full year 2009, beating the target return by 3.8% and boosting total assets to SEK18.2bn (€1.85bn) . This compares well with 2008 when the fund underperformed by 16.6%.

Over the longer-term, however, investment returns have underperformed the target returns. Investments have returned 7% during a 10-year period to 2009, underperforming the target by 2.4%.

In particular, expansion stage - also called early-stage - companies have dragged the numbers down. During 2009, this segment returned -8.3% compared to the target return of 10.6%.  At the end of 2009 AP6 had invested 29% of assets in this sector.

The board began a deeper analysis of these investments in 2009 and will continue to evaluate the value-generation ability of these companies over the next five-year period, to decide whether continued investment is viable. AP6's mandate states it needs to achieve long-term high returns and risk diversification but also benefit Swedish industry and economy.

In its report, the board also said using a rolling 10-year period for measuring returns means it will take several years before performance takes into account how the portfolio has changed in recent years. The current 10-year period is mainly a reflection of investments made at the turn of the millennium, and both the industry and AP6's strategy have changed considerably since then.

The board's analysis of the fund's long-term performance shows that the majority, nearly 70%, of the fund's investments have outperformed. In particular, mature companies returned 15.4%, compared to the target return of 7.9% and listed small companies returned 10.5%, compared to target return of 7.4% over a 5-year period between 2005 to 2009.

AP6 chose not to acknowledge in its latest report the scandal which beset the pension fund in 2009.

Aside from long-term performance concerns, AP6 was last year involved in a scandal which the board admitted damaged the fund's trustworthiness. The board said its appointment of Åsa Rödén as the CEO of Xeratech was inappropriate because she was in a relationship with AP6's chief executive, Erling Gustafsson.

No formal wrongdoing was found but the reputational impact was negative, and the fund has since adopted stricter procedures and regulations to avoid similar incidents from happening in the future. (See earlier IPE story: AP6 admits trust damage by Xeratech scandal)

Since inception in 1996 AP6 has grown from SEK 10.4bn in 1996 to SEK 18.2bn at the end of 2009. It currently invests in 350 companies, out of which 60 are direct investments.

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