AP3’s investments returned 11.4% after expenses in the first half of the year, with the Swedish state pension buffer fund also reporting that its board of directors in June adopted a new sustainability policy.
CEO Kerstin Hessius said the fund’s equity and alternative investment portfolios were the primary drivers of the 11.4% return, which she said was “strong performance”. It was better than AP3’s benchmark by 2.7 percentage points, according to the fund.
AP3’s alternative investments, which have crept up to an allocation high of 25.7%, returned 14.7% in the six months to the end of June. This contributed 3.6 percentage points to the total return, before expenses.
Equities, to which the buffer fund has a 45.4% allocation, returned 15.2%, accounting for 7.2 percentage points of the 11.5% pre-expenses return.
AP3 ended June with SEK466.9bn (€45.6bn) in assets after paying around SEK4bn to the Swedish Pensions Agency during the first six months of the year.
‘Clearer objectives, more extensive reporting’
Writing in the interim report, Hessius revealed that at its June meeting the AP3 board of directors adopted a new sustainability policy, which would govern the fund’s “continued integration of environmental, social and governance aspects in the investment strategy”.
AP3 did not set out what the new policy is, and a spokeswoman for AP3 told IPE that the policy was still “high level” and not yet ready for the public.
“This is in work-in-process the rest of the year,” she added.
According to Hessius, AP3’s operational focus during the first half of the year was – in addition to managing the fund’s capital and evaluating investment opportunities – on “developing and clarifying the sustainability strategy”.
She said the latest report from the UN Intergovernmental Panel on Climate Change highlighted the need for targeted sustainability initiatives that “accelerate transition”.
The CEO also addressed a review of the AP funds’ sustainability-related work that was carried out by the National Audit Office (NAO) in June. She said that as AP3 developed its sustainability initiatives it would take on board the NAO’s recommendations regarding “clearer objectives and more extensive reporting”.
In August 2019 AP3 announced the goals of doubling its investments in sustainability and green bonds by 2025, and halving its carbon footprint within the same timeframe.
This article was updated to correct a figure in the fourth paragraph, which had stated that equities accounted for 3.6 percentage points of the 11.5% pre-expenses return, as opposed to 7.2 percentage points.