A stronger focus on strategic asset allocation and HR
One key strategic consideration for Första AP-fonden is to what extent, and in what areas, the Fund’s asset management and related support functions should be performed by its own staff or by an external party. The decisive factors are quality and cost-efficiency and how important it is for the Fund to retain control over the functions in question.
A knowledge-intensive organization
Första AP-fonden has chosen to conduct a large share of its asset management in-house. The Fund’s 68 employees are responsible for both strategic and tactical asset allocation, management of Swedish and European equities, foreign exchange and the bulk of fixed income management. For other investment areas, external managers are used. To a large degree, business support activities are also handled internally.
A high share of internal management demands a high level of education among the Fund’s staff. Close to three fourths of the employees have a university degree, predominantly in economics and engineering/mathematics.
The number of employees has been largely unchanged since the start in 2001, but as shown in the diagram below there has been a proportional shift from business support functions to analysts and asset managers in investment operations. This has been possible despite a dramatically increased number of transactions through automation of the transaction flow and outsourcing of certain transaction services to the Fund’s custodian bank.
Reorganization in 2008
Several changes have been made in the organization since Johan Magnusson took over as Managing Director of Första AP-fonden in March 2008, including a stronger focus on strategic asset allocation and Human Resources.
The former portfolio strategy and global macro allocation units were merged to create a new unit, strategic asset allocation. A new manager, Andrejs Landsmanis, was appointed to supervise the unit after the former Head of Global Macro Allocation retired. The unit has four employees. In contrast to the Fund’s other investment units, the task of strategic asset allocation is not to create active returns but to take overall responsibility for the Fund’s long-term investment orientation.
The Fund aims to strengthen its focus on HR issues and therefore hired a Head of Human Resources, Marina Westman, at the beginning of 2008 to replace the former Personnel Director after her retirement.
Both the Head Strategist and Head of Human Resources are members of the Fund’s management team.
In 2008 Patrik Nyman was appointed as the new Head of Tactical Asset Allocation after the unit’s previous manager chose to leave the Fund. Patrik Nyman was formerly Deputy Head of the unit.
Educational level
Number of employees by function
Organization
Business support and risk management
All performance measurement, risk management and IT activities are carried out by Första AP fonden’s own staff, since these tasks are considered to be central aspects of the Fund’s management.
The Fund’s investment process relies on access to high quality data (prices, holdings, index, etc.), since precise position data is used in several quantitative models.
A critical function
Efficient and smoothly functioning financial administration is critical for reliable reporting, performance measurement and risk management. The Fund’s internal investment units carry out a vast number of business transactions every year. The financial administration unit ensures that each individual transaction is registered and correctly reported and that all trades are properly settled, i.e. that payment is made upon delivery. The unit is also responsible for daily management of static data from a very large number of securities/derivative contracts. In 2008, basic reporting for virtually all external mandates was outsourced to the Fund’s custodian bank.
Independent monitoring and risk management
One of the Fund’s units, which is independent from the investment units, has special responsibility for valuation of Första AP-fonden’s portfolio. During the year the unit completed a project to improve price control and valuation of listed assets. A new software solution for monitoring alternative investments was implemented during the autumn. This unit is also responsible for reporting of returns and portfolio results, supplemented with performance-related key ratios. Reporting is carried out on a daily, weekly and monthly basis. Much of the research is focused on reconciling the discrepancy between the Fund and benchmark returns, known as attribution analysis.
The tasks of the risk management unit, which is also wholly independent from investment operations, are to identify, measure, control and report all of the Fund’s risks. A more detailed description of the unit’s work is provided in the risk management section.
