The Fourth Swedish National Pension Fund, AP4, made a return of 13 per cent after costs in the first half of 2019, equating to SEK 45.2bn, it has revealed.

It brought the fund’s total capital to SEK 391.4bn at the end of first half of the year. The active return exceeded AP4’s benchmark portfolio by 1.7 percentage points.

With returns amounting to SEK 45.2bn, a net total of SEK 3bn was paid out to the pension system during the first half of the year. Adjusted to a full-year basis, total costs amounted to 0.10 per cent of average assets under management.

Commenting, AP4 CEO Niklas Ekvall, said: “The return during the first half of 2019 was the highest return that AP4 has had for a single first half-year since the start of the new pension system in 2001. This is of course very gratifying.

But it illustrates perhaps above all the volatile market environment that we currently find ourselves in, and the fact that evaluation of a pension fund must be done over a long period of time in order to be meaningful.”

Key contributors to the return were the substantial exposure to equities – both globally and in Sweden – while fixed income investments and real assets also generated favourable returns during the first half of the year.

AP4’s active management made a continued significant contribution of 1.7 percentage points to the portfolio’s return, representing a positive profit contribution of SEK 5.8bn.

“With this I can proudly say that AP4 has extended the already long period of positive, active returns that we have historically shown. Moreover, this further underscores the value of broad and high-quality active management that AP4 conducts,” Ekvall said.

During the spring the government circulated a memorandum for feedback regarding certain other changes in the AP Funds’ investment rules. The memorandum addresses the second step in the modernisation of the AP Funds’ investment guidelines.

“The proposals set forth in the memorandum entail continued significant limitations on investments in illiquid assets. Nor do they give the AP Funds equal conditions as other, comparable institutional investors.

"In its response AP4 points out that the memorandum’s proposals do not go far enough to achieve the previous statement about the legislative change, and that it is urgent to now create a set of rules that give the AP Funds sufficient flexibility to be able to operate in a rapidly changing financial market for many years into the future,” Ekvall added.

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