Real estate and Alternative assets

The portfolio mainly consists of directly owned real estate, and alternative aseets primarily consist of unlisted investments.

Real estate

The property portfolio, including a mandate focusing on Swedish listed real estate companies, amounted to SEK 28.9 (22.7) billion at year end, representing 8.6 (7.3) percent of AP4’s assets. The return for the year amounted to 25.3 (32.2) percent, which corresponds to a positive contribution of SEK 5.8 (5.5) billion. Real estate made a positive active return contribution of 1.2 (1.8) percentage points above the index. This corresponded to SEK 3.5 (5.2) billion.

Directly owned real estate

AP4 has chosen to primarily own real estate companies directly, because it is deemed cost-effective, transparent, and it increases the potential for a good return. At the end of the year, approximately three quarters of AP4’s real estate portfolio consisted of the holdings in the directly owned real estate companies Vasakronan and Rikshem.

The real estate company Vasakronan represents just under half of AP4’s real estate portfolio. Vasakronan is owned jointly by the First, Second and Third Swedish National Pension Funds, with each owning 25 percent. Vasakronan manages commercial properties in Sweden valued at more than SEK 115 billion, making it Sweden’s largest real estate owner. The total return on Vasakronan’s real estate portfolio remained strong in 2016.

Vasakronan integrates sustainability aspects in its business operations and the company has been awarded the highest rating - Green Star - by Global Real Estate Sustainability Benchmark, GRESB, which analyses sustainability achievements in real estate globally. During the year, Vasakronan increased the outstanding volume of green bonds by SEK 2,050 (871) million.

 

The real estate company

Rikshem represents a quarter of AP4’s real estate portfolio and is half-owned by AP4 and AMF. At year end, the market value of Rikshem’s properties amounted to approximately SEK 38 billion. The portfolio is concentrated to housing and so-called societal properties with long leases where the tenant is often a municipality. The total return on Rikshem’s real estate portfolio remained good during 2016. During the year Rikshem issued green bonds for SEK 750 (800) million.

In the spring of 2016, the vice CEO of Rikshem left the company, and shortly thereafter the CEO and chairman resigned. AP4 and AMF, the two equal owners of the company, led the process of appointing a new Chairman, as well as a few new board members. The owners ensured that Rikshem conducted a review and produced an action plan for improvements in identified areas of policies and procedures. Since early Autumn, Rikshem has a new board and a new CEO.

Alternative assets

Investments in Alternative Assets consist primarily of private equity funds and illiquid fixed-income securities.

AP4’s exposure to alternative assets at year-end amounted to 2.3 (2.6) percent of assets. The market value of alternative assets amounted to SEK 7.8 (8.2) billion at year-end. All
alternative assets are managed externally and returned a combined 3.4 (11.3) percent.

Maximum 5 percent according to the law

According to the law, AP4 may invest a maximum of five percent of the assets in unlisted securities. These investments must be made indirectly via  risk capital companies or similar.