AP4 posts record result for 2019

The return was very strong in 2019 and amounted to 21.7% after costs. Successful active management contributed 4.4 percentage points to the return. The result for the year totalled SEK 75.2 billion, and total fund capital increased to SEK 418.0 billion at year-end. Total costs amounted to 0.10% of assets under management. AP4’s cost level was 47% lower than for corresponding pension funds in an international comparison. During 2019 the carbon footprint of AP4’s equities portfolio decreased by a further 11% and is now 48% lower than for a broad global equities index.

“AP4’s return and result for 2019 are the highest since the start of the pension system in 2001. At the same time, the year’s strong performance in the financial markets should be viewed in the light of the very tough end to 2018, with sharply falling stock markets and rising interest rates,” comments Niklas Ekvall, CEO of AP4.

Niklas Ekvall continues: “AP4’s favourable result over time is largely due to the scope to manoeuvre provided by the buffer funds’ legal mandate, the ability to act long-term and withstand large market movements, and low-liquidity investments that are conducive to long-term returns. We believe that we are fulfilling our role in the national pension system in the best way possible by having a substantial share of equities over the long term, which has proven to be beneficial since the start of the pension system in 2001.

“Of AP4’s total return of 21.7%, a full 4.4 percentage points can be credited to our active management. The year’s active return was achieved on a broad base, as most asset management units contributed to this performance. Most of the active return contribution came from Swedish equities, global fixed income and credits, and real estate.

“During the last ten-year period AP4’s portfolio delivered an average annual return of 9.9%. If we instead look ahead, we believe it will be considerably challenging to achieve an equally favourable return over the next decade. In view of the very low interest rates with expected negative real returns on fixed income assets over the medium term, combined with relatively high valuations in general, we can expect lower returns going forward.

“AP4 supports the Paris Agreement and the more ambitious Swedish environmental objective to achieve zero net emissions of greenhouse gases by 2045. One of AP4’s goals is to contribute to the transition to a sustainable society. AP4 has continued its work on lowering the carbon footprint of the portfolio. During 2019 the total carbon footprint of the equities portfolio decreased by another 11%. AP4’s carbon footprint is now 48% lower than for a broad, global equities index. In 2019 AP4 – together with AP1 and AP3 – established the investment company Polhem Infra, which focuses on sustainable infrastructure investments.”

Key ratios for AP4’s operations

2019

2018

Fund capital at end of period, SEK bn

418.0

349.3

Net result for the year, SEK bn

75.2

-0.5

Net disbursements to the pension system, SEK bn

-6.5

-6.8

Fund capital at start of period, SEK bn

349.3

356.6

Asset management costs, operating expenses, %

0.06

0.06

Asset management costs, commission expenses, %

0.04

0.04

Total asset management costs, %

0.10

0.10

Return on total portfolio, net of asset management costs, %

21.7

-0.2

Real return on total portfolio, net of asset management costs, %

19.9

-2.3

Annualised total return after asset management costs, 5 years, %

9.3

8.1

Annualised total return after asset management costs, 10 years, %

9.9

9.9

Real annualised return after asset management costs,10 years, %

8.6

8.7

 

For further information, please contact:
Niklas Ekvall, CEO, phone: +46 8 787 75 51
Karoline Hammar, Head of Communication, phone +46 8 787 75 53

Summary and CEO Letter

AP4’s mission is to contribute to the financial security of current and future pensioners by managing part of the Swedish national pension system’s buffer capital. AP4’s long-term perspective, responsibility as an owner and strong commitment to sustainability create opportunities for high returns at a low cost. In this way, AP4 works for more secure pensions.

Publicerad den 21 februari 2020