Return targets

Our management structure makes it possible to invest over several time horizons – a very long-term perspective that takes into account the needs of the pension system, a medium-term perspective that takes into account macroeconomic and market conditions, and a short-term perspective for individual investment assessments.

Long-term real return target

We make assessments about the pension system’s long-term need for return levels and its need for payments from the AP Funds to cover any deficits. These assessments are made with a time perspective of up to 40 years. The analysis of the pension system is combined with a very long-term assessment of expected returns for various asset classes. This culminates in a long-term return target as well as on decisions on suitable ranges for the portion of equities in the portfolio, on the fixed income portfolio’s average duration, and on currency exposure. The long-term return target is currently a 3.5% annual real rate of return.

Medium-term real return target

In a medium-term perspective, i.e., 5-15 years, more detailed prognoses of the market, growth and inflation can be made. We also make a market assessment of valuation levels, for example. With these as a starting point it is possible to make a detailed analysis of expected returns for the various asset classes in the portfolio. The medium-term return target is currently a 3% annual real rate of return.

Operative asset management with active return target

After that, the operational management takes over. This includes decisions on the allocation of assets in the portfolio as well as investments in individual stocks, bonds and other financial instruments, which are made with a time horizon of up to ten years.

A balanced economic development over time

We share the belief that sustainable development is societal development that meets the needs of people today without jeopardising future generations’ opportunities to meet their needs. We believe that this is a precondition for maintaining favourable and balanced economic development over time.

By conducting climate scenario and sustainability analyses of various investment opportunities, we affect the overall allocation of assets in the portfolio as well as individual investment decisions. By investing in line with sustainability trends, AP4’s asset management integrates sustainability in each individual investment process.

Read more about AP4’s asset management structure in Annual Report 2021 on pages 26–29