AP4 contributes to safeguarding pensions

Everyone that works, receives a salary and pays taxes in Sweden collects a public pension.AP4 manages buffer capital for current and future Swedish pensioners and is partof the Swedish State pension system.

Mission

AP4’s mission is to contribute to the pension system’s stability by managing capital with the aim to maximize returns over time. Environmental and ethical issues must be taken into account without compromising the goal of the best possible return. AP4’s Board of Directors and the business operations should not be controlled by Government directives or by business policy or economic policy interests. Investment rules are specified in the law (2000:192) regarding public pension funds (AP Funds).

Sustainability is important long-term

With the stated goals within the focus areas of Sustainability and Corporate Governance, AP4 works, among other things, to reduce climate risks in the assets with the help of lowcarbon strategies as well as green bonds. AP4 measure and publishes its carbon footprint annually. AP4 is involved in several international collaborations and ownership initiatives within sustainability.

Net payments continue

For the eighth consecutive year, the AP Funds injected capital to cover the pension system’s deficit between pension contributions and premiums paid. AP4 has in total paid out SEK 37 billion since the pension system’s net flows became negative.

A basic idea of the Swedish pension system is that it should be generation neutral. The AP Funds are buffer capital to be used to offset the demographic differences between different generations. Namely, capital is withdrawn from the AP Funds when there is a deficit in the pension system, which today is in part due to the large age group of the so-called Baby boomers that have now retired. It is expected that pension capital from the AP Funds will be used to balance the system’s commitments over the next 20 or more years.

KEY RATIOS, AS PER CLOSING DATE  2016 2015 2014 2013 2012
Fund capital, flows and net profit, SEK bn          
Profit for the period 30.5  20.1  40.2  37.0  23.4
Net flows, pension system -6.6  -4.9  -5.1  -6.9  -3.8
Fund capital 333.9  310.0  294.9  259.7  229.6
Return, %          
Return, total portfolio before costs, % 10.1 6.9 15.8 16.5 11.3
Return, total portfolio after costs, % 10.0 6.8 15.7 16.4 11.2
Return, total portfolio after costs, annualized 5 yrs. 12.0 9.7 10.5 11.6 3.3
Return, total portfolio after costs, annualized 10 yrs. 6.7 6.7 7.6  7.2 7.2
Operating cost ratio % of AuM, annualized          
Operating costs 0.06  0.06 0.07  0.08  0.08 
Operating costs and commission fees 0.10  0.11 0.11 0.11 0.10
Strategic management, 3-15 years          
Active return (compared to index), %-points 1.0 4.8 0.7 1.2 -0.4
Tactical management, up to three years          
Active return (compared to index), average 3 years, %-points 0.3  0.4  0.7 0.6  0.7