Strategic benchmark
The ALM study that was started in the previous year was completed at the beginning of 2008. Based on this and mid-term market expectations, implementation of the new strategic benchmark commenced in May 2008. In view of the escalating financial turbulence, however the implementation was broken off in the autumn.
Portfolio composition
At year-end 2008 the Fund had net assets under management of SEK 171.6 billion (218.8). The total portfolio consisted of 55 percent (59) equities, 47 percent (39) fixed income investments and 5.5 percent (3) alternative (unlisted) investments. The Fund’s net investments in 2008 amounted to SEK 0.6 billion, equal to the year’s capital inflow from the pension system and Fjärde AP-fonden’s special management fund. Net investments were made primarily in equities in order maintain a spread between equities and bonds proportionate to their weightings in the strategic benchmark. The share of assets under active or enhanced management was 97 percent (98). The Fund’s total currency exposure at the end of 2008 was 22.2 percent and was mainly attributable to an open currency position in USD, EUR, GBP, JPY and NOK.
At 31 December 2008, 40 percent (36) of the Fund’s net assets were under external management. Of the total of 26 external management mandates, 24 refer to equities.
Equities
The market value of the Fund’s equity portfolio at 31 December 2008 was SEK 89.6 billion, of which SEK 49.5 billion was managed externally. In addition to spot investments, the Fund’s exposure to the equity markets is also managed with derivative positions. Investments in derivatives have been made predominantly in standardized equity futures, which used for efficient management, portfolio rebalancing and position-taking in asset allocation.
At the end of the year the Fund’s exposure to the equity markets was in line with the strategic benchmark. The Fund’s split of equity investments between sectors and regions is shown in the diagram on the next page. The equity portfolio was well diversified and no single equity holding exceeded 1.2 of the total market value of the Fund’s portfolio.
Around 36 percent of equity investments during the year consisted of enhanced and passive mandates with a low degree of active risk. Other parts of the portfolio were managed actively, with an active risk of 1–10 percent, depending on the mandate. All in all, the level of active risk in equities increased during the year. At year end 2008, active risk in the total equity portfolio was 0.8 percent.
Portfolio composition
|
Asset class |
Portfolio value¹ SEK m, 31 Dec. 2008 |
% of net assets | Exposure², % |
Portfolio value¹ SEK m, 31 Dec. 2007 |
% of net assets | Exposure², % |
Benchmark 31 Dec. 2008, % |
|---|---|---|---|---|---|---|---|
| Equities³ |
|
|
|
|
|
|
|
| Swedish | 17,983 | 10.5 | 11.2 | 27,781 | 12.7 | 13.0 | 11.2 |
| Non-Swedish4 | 60,966 | 35.5 | 37.7 | 84,844 | 38.8 | 40.0 | 37.7 |
| Emerging markets | 10,627 | 6.2 | 6.2 | 13,597 | 6.2 | 6.2 | 6.2 |
| Total equities | 89,576 | 52.2 | 55.1 | 126,222 | 57.7 | 59.2 | 55.1 |
| Fixed income³ |
|
|
|
|
|
|
|
| Nominal Swedish | 22,835 | 13.3 |
|
19,061 | 8.7 |
|
6.3 |
| Nominal non-Swedish4 | 26,174 | 15.3 |
|
44,635 | 20.4 |
|
24.2 |
| Index-linked | 18,112 | 10.6 |
|
21,008 | 9.6 |
|
9.7 |
| Total fixed income | 67,120 | 39.1 | 47.15 | 84,704 | 38.7 | 39.25 | 40.2 |
| Cash/foreign exchange³ | 5,577 | 3.3 |
|
1,405 | 0.6 | 0.7 | 0.0 |
| Total listed assets | 162,273 | 94.5 | 102.2 | 212,331 | 97.0 | 99.1 | 95.3 |
| Alternative investments | 9,354 | 5.5 | 5.4 | 6,460 | 3.0 | 2.9 | 4.7 |
| Total portfolio | 171,627 | 100.0 | 107.6 | 218,791 | 100.0 | 102.1 | 100.0 |
| Currency exposure | 38,182 |
|
22.2 | 41,930 |
|
19.2 | 19.8 |
² Also including the nominal amount of derivative positions with a market value of zero. In calculating exposure
to fixed-income assets, consideration has been given to the interest sensitivity (duration) of the investments.
³ Including tactical and global macro allocation.
4 Including 100 percent currency hedge.
5 Managed as a single portfolio, for which reason no specification of exposure by type of security is possible.
Fixed income
The market value of the Fund’s fixed income portfolio at year-end 2008 was SEK 67.1 billion (84.7) of which SEK 9.1 billion was managed externally. The Fund’s exposure to fixed income markets is managed with spot and derivative positions. Trading in derivatives has been used as an efficient means for achieving the desired exposure.
Aside from Swedish and foreign government bonds, holdings of fixed income securities consisted of bonds issued by intermediary institutions and corporate bonds. The portfolio’s creditworthiness is deemed high and all bonds were rated “Investment Grade”. The portion of secure bonds exceeded the 30 percent minimum prescribed by the investment rules. Secure bonds include Swedish and foreign government bonds. The Fund has made an active decision not to have holdings in so-called structured interest products.
Active risk in fixed income management has varied between 0.3 percent and 0.6 percent.
Foreign exchange
At the end of 2008 the Fund’s currency exposure was 22.2 percent. The largest positions were the Fund’s exposure to EUR, GBP and USD. Active currency risk at year-end 2008 was close to SEK 60 million in RVaR (Relative Value at Risk).
Alternative investments
At year-end 2008 the Fund’s holdings of alternative investments consisted of a 25 percent stake in Vasakronan and holdings in private equity and hedge funds.. The total market value at 31 December 2008 was SEK 9.3 billion.
The Fund’s total commitments to private equity funds at year-end amounted to SEK 10.9 billion, of which SEK 2.3 billion had been invested. The Fund’s goal within
6–8 years is to achieve a private equity exposure equal to 5 percent of the total portfolio.
The Fund’s participations in hedge funds consist of direct holdings in Cevian Capital and Cevian Capital II. Cevian is a so-called activist fund that acquires significant minority ownership positions in undervalued listed companies in Northern Europe.
Management structure, 31 Dec. 2008
|
|
Internal |
|
External |
|
|---|---|---|---|---|
| Portfolio value, SEK bn | Active | Active | Enhanced | Passive |
| Allocation¹ |
|
|
|
|
| Equities, Sweden | 18.0 |
|
|
|
| Equities, Europe | 21.6 |
|
|
|
| Equities, North America |
|
3.4 | 26.5 |
|
| Equities, Pacific and Japan |
|
8.9 | 1.6 |
|
| Equities, Emerging markets |
|
4.7 |
|
4.4 |
| Fixed income | 58.0 | 9.1 |
|
|
| Foreign exchange¹ | 6.1 |
|
|
|
| Alternative investments |
|
9.3² |
|
|
| Total | 103.7 | 35.4 | 28.1 | 4.4 |
² SEK 6.9 bn refers to the Fund’s investment in Vasakronan.
Equity investments by region, 31 Dec. 2008
Sector allocation of equities, 31 Dec. 2008
Fixed income investments by region, 31 Dec. 2008
Nominal bonds by time to maturity, 31 Dec. 2008
Currency exposure, SEK m
|
|
USD | GBP | EUR | JPY | Other currencies | Total |
|---|---|---|---|---|---|---|
| Shares and participations | 33,032 | 6,346 | 12,454 | 6,992 | 14,915 | 73,739 |
| Bonds and other fixed income securities | 20,625 | 1,626 | 18,442 | 2,483 | – | 43,176 |
| Other assets | 656 | 4 | 14 | 380 | 325 | 1,379 |
| Derivatives | -40,742 | -4,982 | -18,794 | 8,414 | -7,180 | -80,112 |
| Net currency exposure, 31 Dec. 2008 | 13,571 | 2,994 | 12,116 | 1,441 | 8,060 | 38,182 |
| Net currency exposure, 30 June 2008 | 12,872 | 3,444 | 18,914 | -5,175 | 10,700 | 40,755 |
| Net currency exposure, 31 Dec. 2007 | 15,738 | 7,177 | 15,003 | -2,528 | 6,540 | 41,930 |
