New record high for AP4 - fund capital rose to SEK 295 billion

Total return for the Fourth Swedish National Pension Fund (AP4) was 15.7% after expenses in 2014. AP4 delivered its best earnings to date of over SEK 40 billion. AP4’s active management outperformed the index for the twelfth consecutive six-month interim period. AP4 overshot both short- and long-term return targets.

- We are very pleased that AP4’s talented managers have outperformed the index for the twelfth consecutive half-year. The contribution over the past six years totals almost SEK 8 billion, which can be viewed in the context of an annual cost of about SEK 90 million to conduct active management, says Mats Andersson, CEO of AP4.

An even more pleasing and relevant aspect is AP4’s solid long-term total return. In the past ten years, it has amounted to 7.6% annually on average, giving a real return of 6.4% annually.

- AP4 has two areas of focus for its sustainability initiatives: climate change and corporate governance. These areas are considered to be important for return and asset development, where we believe AP4’s knowledge, commitment and potential for impact can make a difference and have a positive influence on return over the long term, adds Mats Andersson.

- AP4 pursues the issue that investors worldwide should measure and reduce their carbon footprint. AP4 is one of the four founders of the Portfolio Decarbonization Coalition (PDC), which aims to increase knowledge sharing among investors about how they can reduce their carbon footprint and send a strong signal to companies and politicians that this is on the agenda. AP4 further increased its holdings in low-carbon investments in 2014, which should also be viewed in light of AP4’s desire to increase strategic investments with a horizon longer than three years, says Mats Andersson.

  • Fund capital rose to SEK 295 (260) billion and net profit was SEK 40 (37) billion. Over the past three years, net profit totalled SEK 100 billion.
  • Total return after expenses was 15.7% (16.4). Total return before expenses was 15.8% (16.5).
  • Since evaluation began on 1 July 2001, real return has amounted to an average of 4.7% annually. AP4 overshot the long-term real return target of an average of 4.5% annually.
  • AP4’s active management outperformed the benchmark index by 0.7 (0.5) percentage points before expenses, giving a positive contribution to earnings of SEK 1.4 billion (0.9). It was the twelfth consecutive year in which AP4’s active management outperformed the benchmark index, thus delivering a better return than passive management.
  • Management expenses remain low. The management cost ratio, excluding commission expenses, was 0.07% (0.08) on an annualised basis. Including commission expenses, the ratio was 0.11% (0.11). Management expenses totalled SEK 296 million (277).
  • Foreign exchange exposure was 28.1% (28.6) at the close of the year.
  • In 2014 AP4 paid out a net amount of SEK 5.1 billion (6.9) from Fund capital to help to cover the deficit between outgoing and incoming payments in the pension system. Since 2009, when the system’s net flows became negative, AP4 has paid out a total of SEK 25 billion from Fund capital into the pension system.

 

Stockholm, 20 February 2015

The Report can be downloaded at www.ap4.se.  

Published Tuesday, March 14, 2017