The Fund’s strategies can be summarized in the business mission, vision, investment philosophy and goals. All are based on the mission assigned to Första AP-fonden by the Swedish Parliament. The reasoning behind the chosen investment orientation is described in the following sections.
Första AP-fonden’s mission
- Första AP-fonden shall achieve the highest possible returns on the Fund’s assets, with well-balanced financial risks, and thereby contribute to high and predictable long-term retirement pensions for current and future pensioners.
- Första AP-fonden shall endeavour to achieve a return that exceeds by a good margin the lowest level required in the buffer funds to ensure the long-term stability of the pensions.
- Första AP-fonden shall pursue long-term asset allocation and ongoing management founded on independent and qualified analysis with a global orientation.
- Första AP-fonden shall create confidence and high returns through its commitment to corporate governance and by placing high demands on ethical and environmental considerations with regard to the Fund’s own activities and the assets in which the Fund chooses to invest.
Första AP-fonden’s vision
- We are a role model among international pension funds and create tangible value for the Swedish pension system.
- We generate high absolute and relative returns.
- We have the highest long-term return of the AP funds.
- We contribute to promoting confidence and security in the Swedish pension system.
- We have cutting-edge knowledge, skills and working methods.
- We have a corporate culture characterized by responsibility, respect, participation, cooperation, openness and good ethics.
Investment philosophy
The cornerstones of the Fund’s investment operations are:
- a long-term approach
- diversification of risks
- independent and qualified research, and
- decentralized decision-making.
A certain level of risk is necessary to create the returns demanded by the Fund’s mission. Diversification of risk is a guiding principle for both the composition of the strategic benchmark and for active management. Risks are therefore diversified in many dimensions; across asset classes, sectors, management styles, asset managers and investment approaches.
Two advantages that the Fund has over many other investors are its long investment horizon and endurance. The Fund’s commitments are spread over a considerable period of time and the inflow of capital is not dependent on short-term performance, providing good opportunities to invest in assets with limited liquidity
Operating goals
Första AP-fonden’s operating goal has been defined with respect to the potential influence of the AP funds’ returns and assets on the size of future pension disbursements. Första AP-fonden’s task is therefore to manage the fund assets in a way that contributes to minimizing the risk for automatic balancing. And, if it is possible to do so without increasing balancing risk, the Fund should also endeavour to improve the probability of distributing a surplus.
The Fund strives to achieve a high and stable return on its assets. One key to success lies in the Fund’s ability to adapt the composition of the strategic benchmark (absolute risk) to changes in economic and demographic trends. Furthermore, the Fund must be able to increase returns by diverging from the composition of the strategic benchmark (active risk). The Board of Directors has established targets for both of these success factors.
Operating goals
Total return
- To achieve a total return after expenses of 5.5 percent annually measured over rolling five-year periods.
Active management
- To exceed return on the strategic benchmark by 0.5 percentage points on both an annual basis and over rolling five-year periods.
- The risk-adjusted rate of return, measured as an information ratio, should exceed 0.3 percent over rolling five-year periods.
The return targets for operating management are to be achieved within a tracking error of 3 percent in relation to the strategic benchmark.
