The Fourth Swedish National Pension Fund's (AP4) positive result provided a contribution of close to SEK 19 billion to the pension system. AP4’s active management outperformed the index for the eleventh consecutive six-month period. Fund capital increased to SEK 276 billion.
– It is rewarding that AP4's skilled managers have for the eleventh consecutive six-months outperformed the index. The contribution over the past five and a half years amounts to SEK 7 billion, says Mats Andersson, CEO of Fourth Swedish National Pension Fund.
– Even more rewarding, and more relevant, is AP4's good long-term total return. It has for the past ten years amounted to an average of 7.3 percent per year, which represents a real return of 6.1 percent per year, continues Mats Andersson.
– AP4 is continuing its long-term strategic efforts to reduce exposure to carbon dioxide emissions. Currently, close to 10 percent of our global portfolio is invested through various mandates aimed at exclude those companies that have the most negative impact on the environment in terms of carbon dioxide. In the long run, this is our ambition for AP4's entire equity portfolio, adds Mats Andersson.
- Fund capital increased to SEK 276.0 (259.7 at year-end 2013) billion and profit was SEK 18.7 (14.4) billion. In the first six-month, AP4 paid out SEK 2.5 (3.1) billion net from Fund assets to cover the shortfall between payments and receipts in the pension system. Since the start 2009, when net flows were negative for the first time, AP4 has paid a net amount of more than SEK 22 billion to the pension system.
- The total return after expenses amounted to 7.2 (6.3) percent. The total return before expenses amounted to 7.3 (6.3) percent. AP4 benefited from its high proportion of equities.
- AP4 has generated an annual nominal return, after expenses, of 7.3 percent on average over 10 years, which in real terms (inflation adjusted) corresponds to 6.1 percent. Since the start 2001 the real return amounts to 3.7 percent on average per year, and is clearly better than the income index. AP4 has thereby contributed positively to the pension system’s stability.
- AP4's active management outperformed the benchmark by more than 0.3 (0.1) percentage points before expenses, corresponding to SEK 0.7 (0.3) billion. It is the eleventh six-months in a row that AP4's active management outperforms the benchmark and thereby delivers a better return than passive management.
- AP4’s management cost is low in domestic as well as international comparisons with other pension managers. Administrative expenses, including commission expenses, were at an annual rate of 0.11 (0.11) percent of Fund assets, corresponding to SEK 147 (127) million. Excluding commission costs this share was 0.07 (0.07) percent.
- Currency exposure was 29.2 (28.6) percent at end of June.
Stockholm, July 11, 2014
Fourth Swedish National Pension Fund’s 2014 interim report is available at www.ap4.se