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Prudential to manage e700m corporate bonds for AP3

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SWEDEN- Sweden’s AP3 fund has appointed the US-based investment manager Prudential to run an active Sek6.4bn (e700m) corporate bond mandate.

AP3’s announcement makes Prudential the fund’s first external active manager following a recent decision to switch to active management in asset classes where it feels external managers can outperform the in house investment team.

Less than a quarter of the total fund is managed externally- non-European equities and UK corporate bonds are also managed by outsiders although on a passive basis.

Speaking about the appointment, AP3 chief investment officer Niklas Ekvall said: “this is a sub market where one can expect active management to add value. It has therefore been essential to find an active manager for this asset class.”

When AP3 received its mandate from the Swedish government at the beginning of last year, it was largely constructed of Swedish treasury bonds. Last autumn the fund carried out an ALM study and decided to up the equity share on the portfolio a further 5.5% at the expense of foreign fixed income.

Last Summer it announced it was to invest 5% of the fund in private equity and earlier this year said it was considering investing the same amount in hedge funds via a fund of funds.

Final results for last year show AP3 down 4.4% although it managed to outperform its benchmark by 20 basis points. Chief executive officer Tomas Nicolin said: “given a demanding portfolio adjustment process, turbulent markets and a larger share of passive management than we are aiming for in the long term, I am nevertheless satisfied with this return.”


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