A turbulent year, but active management delivered

Press release
The return for the year was -0.1% before costs and -0.2% after costs. Active management contributed +2.3 percentage points to the return – a significant and important contribution during a year with weak market returns.

With a net result of SEK -0.5 billion and net disbursements of SEK 6.8 billion to the pension system during the year, total fund capital decreased to SEK 349.3 billion at year-end 2018, compared with SEK 356.6 billion at the start of the year.

“Naturally, the year’s negative result is unfortunate, both for the national pension system and for us who work at AP4. At the same time we should remember that this is the first year since 2011 that AP4 has shown a negative result and the second year since 2008. In this context it is also important to remember that the annualised return for the last 10-year period is clearly positive, amounting on average to 9.9%,” comments Niklas Ekvall, CEO of AP4.

He continues: “2018 was a year with periodically high volatility and weak – and in many cases negative – returns on financial assets. It is therefore gratifying that AP4’s active management was very successful in 2018 and significantly limited the impact of the weak market on AP4’s total return. This illustrates the value of broad-based and high-quality active management in the prevailing low-return environment.”

AP4’s total costs amounted to 0.10% of average fund capital. Operating expenses amounted to 0.06%, and commission expenses amounted to 0.04%. The cost level was 49% lower than for a selection of international pension funds in an international comparison.

In November 2018 Swedish parliament passed changed rules for the AP funds, which took effect on 1 January 2019. The changes entail a modernisation of the investment rules and that the AP funds are to manage pension assets in an exemplary fashion through responsible investments and responsible ownership.

“I welcome the fact that sustainability has now been added to the legal language with the clarification that asset management shall be conducted in an exemplary fashion through responsible investments and responsible ownership,” notes Niklas Ekvall. “AP4 has a long tradition of working with sustainability issues in its management and is today at the international forefront in this respect. During 2018 AP4 continued its work on reducing the carbon exposure in its global equity portfolio. This included our divestments during the year of companies with exposure to thermal coal and oil sand. AP4 has also divested companies involved with nuclear weapons.”

As a second step, opportunities are being investigated for the AP funds to make direct investments in unlisted infrastructure companies, illiquid credits and co-investments in unlisted companies.

Niklas Ekvall concludes: “It is of utmost importance that the second step communicated in the modernisation of investment forms and types of instruments is carried out as planned in 2019. As currently only be able to make unlisted investments through funds is expensive and no longer market practice. Allowing direct unlisted investments would also enable investments based on the very long-term perspective of the AP Funds. A modernisation also in this area is therefore a prerequisite for the AP funds’ ability to purposefully and cost effectively use the greater freedom to act that the change in the first step conveys.”

Key ratios for AP4's operations  2018  2017 
 Fund capital at year-end, SEK bn  349.3  356.6
 Net result for the year, SEK bn  -0.5  30.1
 Net disbursements to the pension system, SEK bn  -6.8  -7.4
 Fund capital at the start of the year, SEK bn  356.6  333.9
 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, %  -0.2  9.1
 Real return on total portfolio, net of asset management costs, %  -2.2  7.4
 Annualised total return after asset management costs, 5 years, %  8.1  11.5
 Annualised total return after asset management costs, 10 years, %  9.9  7.3
 Real annualised return after asset management costs, 10 years, %  8.7  6.9


AP4’s 2018 Annual Report can soon be read and downloaded at www.ap4.se.
Swedish version available here.


For further information, please contact:
Niklas Ekvall, CEO, phone: +46 (0)8 787 75 51
Tobias Fransson, Head of Strategy and Sustainability, phone: +46 (0)8 787 75 28