SWEDEN – Sweden's first national pension fund plans to enter the small-cap emerging market (EM) equity market and boost its allocation to active managers targeting the region.
The SEK221bn (€25.2bn) AP1 currently invests just over 10% of its overall assets in emerging markets, with the lion's share of that being handled by external asset managers.
As part of a shift in its allocation, the fund said it would look to increase the volume of assets allocated to active EM managers.
New appointees would join a framework agreement if selected after the tender.
Additionally, the fund said it would look to invest in EM small-cap equity, as well as grow its frontier market exposure.
In the tender, released in late 2012, the fund said: "AP1 has a core satellite philosophy when structuring a portfolio of managers, where the satellites are high-conviction managers that have a benchmark-agnostic approach and focus on the absolute return, rather than the benchmark-relative return."
It said it would consider investments into both global EM equity and global frontier markets or a combination of the two.
Additionally, exposure to aforementioned global small cap or individual strategies exclusively targeting Asia, Latin America and/or the EMEA region should be put forward.
AP1 did not say by how much it would increase its exposure to emerging markets, but asked any interested parties to complete a request for proposal through its dedicated tender portal.
More detailed questions pertaining to the framework agreement will be published on 10 January.
The buffer fund saw its emerging market equity holdings return 5.5% in the first six months of last year, above the average return of 4.5% for the half year.
Over the same period, it also boosted its exposure to alternative assets, dedicating a large amount of a SEK10bn investment to hedge funds.