SWEDEN – The SEK14bn national PPM default fund Sjunde AP-fonden (AP7) has finalised its external investment manager line-up by appointing Goldman Sachs Asset Management to a e100m active European equity mandate and Carlson Investment Management to a SEK800m (e88.7m) active Swedish equity brief.

The Goldman Sachs mandate will be benchmarked against the FTSE World Index Europe, while Carlson’s brief will be measured against SIX Findata’s domestic index.
Carlson was chosen from a shortlist of six Swedish managers, with advice on the RFP given by consultant William M. Mercer, whom AP7 consulted throughout the entire search process.

“Carlson is analytically oriented, which we like, and they could also meet the strict internet based reporting requirements we have,” says Richard Gröttheim, deputy managing director at AP7.
“A key factor in our selection of Goldman Sachs was the extensive risk control framework in place at the firm, together with the strong investment process,” he adds.

Recently, AP7 has changed its equity/bond balance in favour of stocks.
“We changed equity exposure from 85% to 90% after we got the PPM statistics from last year.
“ We have a target to deliver pensions to our clients in line with the average, and those who made an active choice wanted 92% in equity,” says Gröttheim.

The premium savings fund allocates 25% of its assets into Swedish stocks, 35.75% in North and South American equities, 19.5% in European shares and 9.75% in the Asian stock markets.
The rest is invested mainly in Swedish bonds.

Even though PPM funds are currently worth around 85% of their initial value last year, Gröttheim believes equities will outperform bonds in the long-term.
AP7 has also done slightly better than the Swedish average during the current market downturn: losing 13% of its value to fall from SEK15.9bn to SEK13.8bn.

The national PPM system is currently paying in contributions for 1999, which should mean a further inflow of around SEK6bn to AP7.
According to PPM, the process should be finalised by April 16.
In May, according to estimates, AP7 will also receive SEK200-300m in contributions from those who earned their first premium pension eligible wages in 1999.

According to Gröttheim it is company policy to benchmark all portfolios against the FTSE universe except the Swedish briefs, which are compared to tracker SIX Findata’s Swedish index.
The majority of AP7’s Swedish investments are managed in-house, with a quarter outsourced to State Street and a small part actively managed by Carlson.

Paris based CDC IXIS Asset Management has already been chosen to manage a SEK1bn European active core mandate.
Schroders manages a SEK400m (e43.6m) Far Eastern mandate, including assets in Australia, Hong Kong, New Zealand, South Korea, Singapore and Taiwan.
Nomura Asset Management UK has been given a SEK1.1bn active Japanese equity mandate.
The fund’s US portfolio is managed passively by State Street.