Management costs

Cost efficiency is decisive for achieving the goal of generating the highest sustainable return over time. A cost focus is therefore an integrated approach that permeates AP4’s operations. AP4 disclose its costs transparently in all reporting and communication.

As per June 30 2021, AP4’s total management cost was 0.09% (0.09%), 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, as per June 30 2021, was 0.06% (0.06%). AP4’s commission expense ratio was 0.03% (0.03%).

Cost-efficient in an international comparison

AP4’s cost level is considerably lower than comparable international pension funds, as shown by an analysis conducted by CEM Benchmarking for 2019. AP4 has a sufficiently high level of fund capital to conduct cost-efficient asset management and an asset allocation focused on asset classes that are less cost-intensive to manage. The lower cost level can also be credited to AP4’s implementation style, mainly with a larger share of internal management than other pension funds. AP4 is also cost-efficient by paying lower costs for corresponding services than what other pension funds do, such as management fees. This makes AP4’s cost level roughly half of what it is for the comparison group. 

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.