Asset allocation

Listed shares represented more than half of the assets at year end. The other assets consisted of fixed income assets, real estate and alternative assets. The overall asset allocation during the year changed marginally.

Equities more than half of assets

The underlying values for derivatives in the passive allocation are allocated to each asset class in the diagram above.

Equities – five consecutive years of positive development

Global and Swedish listed shares accounted for more than half of the assets. At year-end the equity exposure amounted to 58.3 (56.9) percent of assets allocated as follows: 39.4 (38.4) percent global equities and 18.9 (18.5) percent Swedish equities.

The market value of listed shares amounted to SEK 194.8 (175.0) billion.

The world index (MSCI ACWI) performed positively for the fifth year in a row. After a weak start to the year with declining equity markets, the trend in most markets was positive but volatile. Sweden continued its strong performance compared to the world index as it has in four of the past five years.

The return for AP4’s global equities and Swedish equities amounted to 7.3 (1.7) percent and 12.4 (14.1) percent
respectively.

Fixed income assets in a low interest rate environment

AP4 is required by law to have at least 30 percent of assets invested in fixed income securities. At year-end, 32.1 (33.8) percent of assets were invested in fixed income securities.

The market value of fixed income assets amounted to SEK 107.1 (103.8) billion.

Long-term interest rates fell during the year from already low levels in all major markets where AP4 is active. US long-term rates was the exception, which increased slightly after a sharp turnaround towards the end of the year. Return for AP4’s fixed-income portfolio amounted to 2.0 (-0.1) percent.

Real Estate generates high returns

AP4’s real estate portfolio consists primarily of Vasakronan and Rikshem. The property portfolio comprised 7.3 (6.6) percent of AP4’s assets at the end of the year.

The market value of the real estate portfolio amounted to SEK 24.5 (20.5) billion.

The value increase for real estate assets has been very good, and the total return amounted to 25.9 (32.1) percent.

Alternative assets

Alternative assets include private equity funds, high-yield fixed-income and an investment based on absolute returns. At year-end 2.3 (2.6) percent of assets were invested in alternative assets.

The market value of alternative assets amounted to SEK 7.8 (8.2) billion.

Alternative assets are externally managed and returned 3.4 (11.3) percent combined.

Currencies contributed positively to earnings

AP4 hedged a significant proportion of its assets denominated in foreign currencies. Currencies are managed based on a currency policy that determines the open currency exposure in AP4’s reference portfolio.

The open foreign currency exposure at year-end was 26.9 (27.0) percent and provided a positive contribution of 2.3 (1.7) percentage points. A continued weakening of the Swedish
krona against virtually all currencies, except for the British pound, added to the positive earnings contribution.

Other

"Other" includes cash and Tactical and Strategic asset allocations in the form of a so-called overlay mandate, which in total contributed a return of -0.2 (-0.1) percentage points.