AP3 achieved a record total return of 17.9% last year, as fund capital rose nearly SEK32bn to SEK192bn (US$24.4bn).
All assets in the fund’s portfolio generated positive returns, with the fund beating its benchmark by 1.2%, or SEK1.8bn. AP3’s 2005 performance was slightly below sister fund AP2’s returns of 18.7%, but above AP1 (17.5%) and AP4 (16.9%).
The fund’s net profit amounted to SEK28.8bn, and AP3 said total return was “the strongest growth in a single year” since AP3’s inception in 2001, although that figured dropped to 17.7% after expenses.
AP3’s global equity management contributed SEK 1.1bn to the active return, while tactical asset management added SEK800m.
AP3 CEO Kerstin Hessius (pictured) attributed the strong performance to a highly diversified portfolio combined with active management. “Net profit was the highest in our history and strong returns in 2005 helped to lift our real return on fund capital to an average annual rate of 3.5%.”
For 2006, AP3’s board said it had set a new strategic portfolio in which currency exposure was reduced from 14.7% to 13%.
“Weights in index-linked bonds have been increased from zero to 7.5% at the expense of nominal bonds, while market weights have also been changed,” the board said.
In the equity portfolio, the Asia and emerging-market weights were increased, while exposure to Europe and North America was reduced. As for the fixed income portfolio, the weight of nominal bonds in Asia and the US was increased, and the weight in European nominal bonds lowered.
In total, the four buffer funds generated SEK 147.6bn since the new-style pension system came into effect in 2001.
By Damian Clarkson
Mark Evans has been appointed as a director at Independent Trustee Services (ITS) to lead trustee appointments in London.
The Pension Protection Fund (PPF) is consulting on changes to the actuarial assumptions it uses in valuations in a bid to better reflect the bulk annuity market, with schemes set to move into surplus on aggregate.
Private sector defined benefit (DB) schemes were 96.3% funded on a Pension Protection Fund (PPF) compensation basis at the end of July, according to the lifeboat fund's monthly index.
Conduent has completed the sale of its actuarial and human resource consulting business to private equity investor, H.I.G. Capital.