| Swedish APs ended 2005 on a sweet note |
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| 05/03/2006 | ||||||||||||||||||||||||||||||||||||
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Has the restructuring effort finally paid off? All but one of the Swedish APs outperformed their benchmark in 2005. This is likely to provide support for the decision to reorganise the management of the AP funds in 2005 after lingering criticism about their poor and highly correlated performance. The only AP that did not beat its benchmark, the SEK180.2bn AP4, missed the mark by only 0.1%. "Our fixed income and currency management portfolios outperformed their reference indices, as did tactical asset management. However, the global equity portfolio and especially the Swedish equity portfolio were too defensively positioned to meet their targets", according to Thomas Halvorsen, the president of the scheme. Thanks to bullish markets, the scheme's returns are nevertheless up year-to-year, with a 16.9% return in 2005, compared to a 10.6% return in 2004. Comparative allocation and performance of the Swedish APs
** Relative to the scheme's benchmark Source: AP funds, at 31 December 2005, save for AP2 at 30 June 2005. The best performing scheme was the SEK187.3bn AP1, which, at 17.5%, posted its best results since its launch in 2001. The scheme executives attributed its good performance to the high proportion allocated to bullish equities, along with positive returns from active management. At 46.4%, the fund's allocation to global equities is the largest of the four general APs (AP6 and AP7 being special purpose funds). "Our positioning was highly successful and made a substantial net contribution to the pension system", said William af Sandeberg, AP1's managing director. The scheme stated: "Virtually every part of the fund's management added to the strong active return, with internal strategic and tactical asset allocation, foreign exchange management and Swedish equities all outperforming their benchmark indices. The same applies to the portfolios managed externally on behalf of the Fund." AP3 closely follows with a 17.9% return and a 1.2% outperformance, making 2005 its strongest year since the inception of the fund. "Our strategy of a highly diversified portfolio combined with active management enjoyed success in 2005", stated the scheme. "Net profit was the highest in our history and enabled us to contribute an additional SEK 28.8 billion to the pension system. Strong returns in 2005 helped to lift our real return on fund capital to an average annual rate of 3.5%." The SEK192bn scheme is heavily invested in alternative assets, which account for 35.9% of its allocation. Last but not least, the SEK190.6bn AP2 churned out the highest absolute return at 18.7%, but did only slightly better than its benchmark at 0.2%. "This positive return is primarily attributable to the success of its tactical allocation during the year", explained a spokesperson. AP2 has sought to make its asset management operations more efficient in 2005 and has brought a large portion of the fund's low-risk equity management activities in-house. J.L. |
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