End of 2019, AP4’s total management cost was 0.10 % (0.10 %), measured as a percentage of average fund capital. The management cost consists of operating expenses and commission expenses. Operating expenses consist mainly of personnel costs, IT costs and cost of premises. Commission expenses consist mainly of fees paid to external asset managers and custodian fees.
AP4’s operating expense ratio, which expresses operating expenses as a percentage of average fund capital, was 0.06% (0.06%). AP4’s commission expense ratio was 0.04% (0.04%).
Cost-efficient in an international comparison
AP4 has high cost efficiency and low costs in an international comparison, which is confirmed in an independent survey conducted by CEM Benchmarking for 2018. In the survey, AP4’s cost level was only 38% of the costs of a selection of internationally comparable funds. In view of the asset composition and portfolio’s size, AP4’s cost level is 53% of a corresponding international comparison group. The lower cost level is due to implementation style – mainly a lower share of active external management – and cost efficiency, i.e., AP4 has lower costs for corresponding services such as asset management fees.
Internal and external management
AP4 strives to manage assets internally when it is deemed to be cost-efficient, i.e., if AP4 can generate equal or higher returns for the same or lower cost than corresponding external management. One prerequisite for this is that AP4 has the right resources, expertise and experience. A larger share of internal asset
management therefore entails slightly higher operating expenses. The relatively higher level of operating expenses is compensated by lower commission expenses for external asset management.
For external mandates, AP4 negotiates with the aim to pay the lowest fees possible for the selected asset management strategy for an estimated maximum risk-adjusted return. Costs are steered by the choice of asset classes and asset management strategy. The goal is to achieve a high risk-adjusted return after costs. The lowest absolute cost is therefore not always an accurate measure. A significant share of AP4’s exposure to unlisted properties exists through its direct ownership in the companies Vasakronan and Rikshem. This is a long-term and cost-efficient investment form.