SWEDEN - Sweden's SKr 132.7bn (E14bn) third national pension fund AP3 has completed its manager search for Japanese and Asia Pacific (ex -Japan) equities.
The contracts will be the first active equities mandates in AP3’s external asset management portfolios.
The Japanese brief is divided between Capital International and Schroders. Both managers will manage approximately JPY16.9bn (E0.14bn) locally from Tokyo benchmarked against the FTSE All-World Japan index.
All of the assets were previously held on a passive basis by State Street Global Advisors as a combined Asia -Pacific (incl-Japan) portfolio.
JP Morgan Fleming Asset Management has also been hired as sole manager for the Asia Pacific (ex-Japan) mandate. The portfolio will also managed locally in Hong Kong. The value of the mandate is around US$102m (E103m), and will be benchmarked against the FTSE All-World Developed Asia Pacific (ex-Japan) which covers Hong Kong, Singapore, New Zealand and Australia.
JP Morgan is also permitted to invest a maximum of 10% of the portfolio in South Korea and Taiwan.
Since AP3’s inception in January 2001 all of the fund’s external management equity mandates have been held on a passive basis.
Lena Djurberg, portfolio manager at AP3’s external management team said: “AP’s strategy is to hire external asset managers where these can be expected to outperform our own internal managers. This applies especially to Asian equities markets, where local presence is a crucial prerequisite to successful asset management. In addition, this is a region where there is good potential to outperform the market. It has therefore been essential to find active managers for these equities portfolios.”
The fund will also tender for an active US smid cap equities brief in September which could be worth up to Skr3.8bn. Currently, Merrill Lynch Investment Managers holds Skr19bn in passive US equity.
AP3, one of four independent AP Funds, is designed to manage buffer capital to assure long-term stability in the Swedish pension system. Each of the four funds has the same mandate to generate the best possible long-term return on capital in relation to the liabilities in the pension system. The basic principle is that disbursements of pensions to today's pensioners are financed by contributions (16% of nominal pay) from today's employees. The task of the AP funds is to serve as a buffer, smoothing out temporary variations in contributions and disbursements.
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