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AP2 doubles Chinese equity mandate after returns of 59%

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Sweden’s buffer fund AP2 plans to invest an additional $200m (€175.5m) in Chinese equities after getting permission from local authorities increase holdings in a region where it generated investment returns of 59%.

Presenting its 2014 annual report, which revealed a rise in total return to 13.3% from 12.8% in 2013, AP2 said it had received permission last month to invest $200m in the equities listed on China’s domestic markets.

It had already received its first permit for the same amount in 2013, and the decision comes after the fund had decided to boost its exposure to emerging market equity and debt over the course of 2014.

Eva Halvarsson, chief executive of the fund, said: “It is […] highly positive that we have been granted a permit for further investment in listed Chinese equities, given the fact that this portfolio generated a return of no less than 59.1% in 2014.”

In absolute terms, AP2 made a net result for 2014 of SEK34.3bn (€3.6bn), up from SEK30.1bn.

The 13.3% return on the total portfolio excludes commission costs and operating expenses, which amounted to around two percentage points of last year’s return.

Assets under management grew to SEK293.9bn in 2014 from SEK264.7bn, and rose further in January this year to pass the SEK300bn mark, the pension fund said.

Halvarsson said all asset classes had contributed to 2014’s “strong results”. 

“Our active portfolio management has generated an excess return of 0.5%, contributing SEK1.1bn to the national pension system,” she said.

Net outflows to the national pension system were were SEK5.1bn in 2014, down from SEK6.9bn the year before.

Having calculated the annual carbon footprint for its equities portfolio for the second time, AP2 said these investments represented 2.2m tonnes of carbon, corresponding to 17 tonnes for every million kronor invested.

Read more about China and other emerging markets in IPE’s recent Special Report on the matter

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