SWEDEN - Forsta AP-fonden, the first Swedish national pension fund, posted a SEK8.1bn increase in assets during the first half of the year thanks to a high equity share, rising stock prices and falling interest rates.
Stockholm-based AP1 amounted to SEK126.6bn at June 30, 2003, representing a total rate of return of 6.6% before asset management costs. AP1 puts its asset management costs at around SEK83m.
The fund's managing director, William af Sandeberg, said that the rise in fund capital was partly attributable to the year’s profit and partly to a net inflow of SEK 1.4bn.
“It is highly satisfying that our profit has improved and that the fund capital has grown by SEK9.5bn since year-end,” said Sandeberg.
“Our strategy since mid-year 2002, to maintain a high proportion of equities, has been effective.”
AP1 said that its internal foreign exchange management and asset allocation (15%) has been successful and made a positive contribution to the fund's total rate of return.
However, return on the listed portion of the fund's portfolio marginally underperformed the fund's strategic benchmark.
Since June 2002, the fund’s strategy has been to maintain a high proportion of equities. The current strategic allocation stands at 58%.
“It is obviously much too early to let down our guard even if we are seeing an upswing in the equities market,” added Sandeberg.
AP1 also announced a new ownership policy in which the ethical and environmental policy is also included. The existing policy has been revised, partly to clarify the fund's standpoint on matters related to the composition of the boards, nomination procedures and bonus systems.
Separately, AP1 is pressing ahead with its mandates spree, as exclusively revealed to IPN earlier this year. The fund is to seek managers for an initial foray into active European small-caps at the start of 2004. Following the recent appointment of Sofia Ericsson as head of alternative investments, AP1 is also looking at a potential 3% allocation in the asset class, including real estate, hedge funds and private equity. A new custody mandate is also in the pipeline, which will cover all international fixed income and global equity assets.
Currently, AP1 is sifting through applications for a strategic consultant for qualified financial advisory services, including asset liability modelling, manager selection and evaluation, alternative investments, risk management, performance measurement and other financial advisory services. Between 3 and 8 candidates will be shortlisted for the mandate which will begin on September 30.
A number of pension schemes have been prompted to lock in gains with a move into bonds after the estimated deficit across FTSE 100 DB pension schemes improved by £36bn, over the 12 months ending 30 June last year, JLT Employment Benefits found.
HM Treasury has agreed in principle to give NEST a £329m contingent liability guarantee in the event of the master trust's wind up or closure.
AMP Capital has set up a dedicated team to help institutional investors, including pension funds, invest in infrastructure through direct equity allocations.