Management structure and asset class

A management structure with three long term investment horizons gives AP4 opportunity to take advantage of more investments with expected good returns, which also lowers the risk in the asset portfolio. All investment horizons contributed positively since the inception of the new structure in 2013.

Three investment horizons

The management structure implemented in 2013 has three investment horizons: Normal portfolio, 40 years; Strategic Management, 3-15 years; and Tactical Management, up to three years.

The Normal Portfolio is AP4’s reference portfolio where the asset-allocation is resolved by the Board. It has a time horizon of 40 years.

AP4’s assets, such as equities, fixed income securities and real estate are managed within the Strategic and Tactical Management.

Strategic Management has an investment horizon of 3-15 years and Tactical Management has an investment horizon of up to three years.

The evaluation period for the management structure is a rolling five years, which means that 2017 will be the first full evaluation period.

Long-termism characterizes the strategy

The management structure allows AP4 to better take advantage of its long-term mission. The structure allows for more investment strategies and increased risk diversification. This means increased opportunities for positive excess returns.

The structure allows for a slightly longer-term investment horizon than that of the average term of the investor community, and is expected to increase AP4’s potential for high returns over time.

Transparency

The management structure provides high measurability and transparency regarding return, risk and costs. The Board and other stakeholders are also better able to oversee and evaluate AP4’s management.

Positive contributions from all investment horizons

For 2016 management profits before expenses amounted to SEK 30.9 (20.4) billion, where SEK 3.2 (14.3) billion were attributable to the Strategic and Tactical Management.

Since the implementation of the management structure in 2013, all investment horizons have generated positive earnings contributions. The total profit contribution over the four years was SEK 129.1 billion. Strategic Management contributed SEK 21.6 billion and Tactical Management
contributed SEK 2.6 billion.

The investment horizon contributions over four years