Favourable return as the world transitions from crisis to restart

The Fourth Swedish National Pension Fund’s (AP4) return for the first half of 2021 was 10.0 before costs, and 9.9% after costs. AP4’s total fund capital as per 30 June 2021 was SEK 489.8 billion, compared with SEK 449.4 billion at the start of the year. The result for the first half of 2021 was SEK 44.5 billion. During the same period, net payments from AP4 to the pension system totalled SEK 4.2 billion. The portfolio’s active return during the first half of the year was higher than the return for AP4’s benchmark portfolio, by 0.8 percentage points. Currency exposure at the end of the period was 21.0% of fund capital, which was unchanged since the beginning of the year.

“AP4’s asset portfolio generated a favourable return of 9.9% during the first half of 2021 after costs following an equally solid return of 9.6% for the full year 2020. These are historically favourable returns, but they should also be viewed against the background of the massive financial and monetary policy stimulus measures that were introduced across a broad front in 2020 and early 2021,” comments Niklas Ekvall, CEO of AP4. 

“Hopefully the world is now successively emerging from the most acute part of the Covid-19 pandemic. In the uncertain environment that is still prevailing it is natural that actors in the financial market are having a hard time determining what type of cycle the world economy is heading into. A tug of war is currently in progress where the hope for a prolonged period of strong economic growth is on the one side and concerns about bottlenecks and rising inflation are on the other. This tug of war will likely result in an uncertain market environment going forward. We should also expect to see lower returns on financial assets in the coming years compared to what we have seen in the last ten years," says Niklas Ekvall.

“We are continuously developing our work on integrating sustainability in our investment activities, and one such area is thematic sustainability investments, where we are working systematically and proactively to identify investments that can generate favourable returns to the pension system while at the same time significantly contributing to the climate transition. During 2020 and the first half of 2021 AP4 made new investments in sustainable infrastructure, renewable energy and other parts of the energy transitionof approximately SEK 10 billion,” concludes Niklas Ekvall.

 

Key ratios for AP4’s operations 

30 June 2021 

30 June 2020 

2020 

Fund capital at start of period, SEK bn 

449.4 

418.0 

418.0 

Net result for the period, SEK bn 

44.5 

-10.6 

39.3 

Net flow to national pension system, SEK bn 

-4.2 

-4.2 

-7.9 

Fund capital at end of period, SEK bn 

489.8 

403.2 

449.4 

Asset management costs, operating expenses, % (annualised) 

0.06 

0.06 

0.06 

Asset management costs, commission expenses, % (annualised) 

0.03 

0.03 

0.03 

Total asset management costs, % (annualised) 

0.09 

0.09 

0.09 

Return, total portfolio, before costs, % 

10.0 

-2.5 

9.7 

Return, total portfolio, after costs, % 

9.9 

-2.5 

9.6 

Real return after costs, %1 

8.8 

-1.6 

9.1 

Annualised return after costs, 5 years, % 

11.5 

7.4 

9.8 

Annualised return after costs, 10 years, % 

10.6 

9.5 

9.7 

1 The CPI for June 2021 is an estimate, since this figure was not yet available at the time of publication of the interim report. 

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AP4’s mission is to contribute to the financial security of current and future pensioners in Sweden by managing part of the 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 13 juli 2021