In 2008 the Fund’s net assets decreased by SEK -47,164 million and amounted to SEK 171,627 million (218,791) at the end of the year. The change is attributable to the Fund’s substantial net investment loss of SEK 48,047 million (9,667) and net capital inflows within the pension system. These flows consisted partly of net pension contributions and disbursements of SEK 983 million and partly of costs for administration of the pension system, which were charged to the Fund in an amount of SEK 152 million. Added to this is SEK 52 million in assets transferred from Fjärde AP-fonden’s Special Management Fund.
Operating income
For 2008 the Fund reported a significant operating loss of SEK 48,047 million, of which net realized and unrealized valued losses/gains accounted for SEK -56,489 million (3,110). The majority of the Fund’s assets are listed, which means that they are traded on an active market at quoted prices that represent actual and regularly occurring market transactions. For around 7.3 percent of the Fund’s assets there were no quoted market prices to available at year-end, and for these the Fund has instead used generally accepted methodologies for estimating fair market value on the date in question.
The year’s unrealized and unrealized value adjustments on listed shares amounted to SEK -66,890 million (2,616). Investment earnings were also charged with operating expenses of SEK 85 million (28) in the form of performance-based fees for external management. These expenses are recognized directly in net investment income in accordance with the accounting polices applied by the Fund.
The net investment loss for unlisted equities was SEK 1,331 million (493), of which the bulk consists of unrealized value adjustments.
Net investment income for fixed income assets was SEK 937 million (727), including a provision of SEK -0.5 billion for anticipated credit losses affecting the Fund. These credit losses are related partly to the bankruptcy of the US-based investment bank Lehman Brothers and partly to a estimated credit loss in the reinvestment programme of the securities lending program.
Investments in derivatives gave rise to SEK 282 million (-388) in realized and unrealized value adjustments. Due to dramatic strengthening of currencies against the Swedish krona, net realized and unrealized foreign exchange gains – a result of the Fund’s decision to maintain currency exposure – were uncommonly high at SEK 10,513 million (-338).
The year’s direct return in the form of net interest income and dividends amounted to SEK 8,761 million (6 875). Net interest income also includes income of SEK 101 million (81) from the securities lending program.
In addition, operating income was charged with commission costs relating to fixed fees for external management and costs for custody services. These costs amounted to SEK 139 million (153) in 2008.
Operating expenses
Operating expenses totalled SEK 180 million (164). Measured in relation to the average value of net assets, this represents an annual expense ratio of 0.09 percent (0.08). Including commission costs the Fund’s expense ratio is 0.16 percent (0.15), where the increase between years is mainly explained by a lower average level of net assets.
Market values
Market values and other amounts in the directors’ report are based on internal portfolio accounting and therefore contain accrued items as well as netting of assets and liabilities. Due to a differing methods for valuation of foreign assets and liabilities, where valuations in the external accounts are based on the closing bid rate on the balance sheet date and in the internal accounts on the average bid rate on the balance sheet date, a difference of approximately SEK 65 million has arisen in the Fund’s closing net assets. As a result, the amounts in the directors’ report are not directly reconcilable against items in the balance sheet and income statement.
Development of net assets
Fund asset development
| Net assets, SEK m |
|
|---|---|
| Opening net assets | 218.791 |
| Net pension contributions from SSIA¹ | 983 |
| Administrative contribution to SSIA¹ | -152 |
| Transferred from liquidation funds¹ | 52 |
| Net investment income for the year | -48.047 |
| Closing net assets | 171.627 |
¹ For details, see Note 15
Operating expenses
Investment income and net inflow
