At 31 December 2010, 43.7 percent of the Fund’s total net assets were under external management. This is equal to an increase of around 1 percentage point over the previous year. A total of SEK 95.5 billion was managed externally.
Of total assets under external management, SEK 78.4 was invested in listed assets, divided among six different mandates:
- US equities (large and small caps)
- Japanese equities (large caps)
- Pacific equities excluding Japan (large caps)
- Emerging market equities
- US corporate bonds, and
- European corporate bonds
The six mandates are divided between 11 managers and 15 different management mandates. The external management unit has continued working in line with the Fund’s increased focus on strategic asset allocation. External management has shifted from a multi-manager approach targeting diversification and generation of excess returns to fewer managers with either basic or specialist mandates (core-satellite management).
Activities during the year were focused on efforts to concentrate the number of mandates in emerging markets, where three mandates were withdrawn. As a result of asset allocation and changes among managers, two mandates were terminated in Japan.
External management mandates, 31 December 2010
|Market||SEK bn||Starting date|
|BlackRock||North America, large caps||35.1||Jan 01|
|Hillswick¹||North America, large caps||0.3||Dec 09|
|BlackRock¹||North America, small caps||2.3||Nov 09|
|Champlain¹||North America, small caps||0.9||Nov 09|
|Ironbridge||North America, small caps||0.8||Apr 04|
|JP Morgan REI||Pacific³||2.3||Sep 08|
|Treasury Asia||Pacific||1.2||Sep 08|
|Capital International||Pacific||1.7||Dec 03|
|Lloyd George||Pacific||1.7||Apr 04|
|Aberdeen||Emerging markets||3.6||Jun 06|
|Emerging Markets Mgmt||Emerging markets||0.5||Jun 06|
|BlackRock||Emerging markets||14.6||Jun 06|
|BlackRock2||Corporate bonds, USA||7.7||Oct 99|
|BlackRock||Corporate bonds, Europe||4.0||Jul 08|
|Total external management, listed assets||
²BlackRock Inc.’s mandate commenced in October 1999, i.e. prior to reorganization of the national pension funds. Första AP-fonden allowed the mandate to continue under the new management that was started on 1 January 2001 and expanded in 2003.
³According to the definition used by the Fund, the Pacific region consists of Australia, New Zealand, Singapore, Hong Kong and Japan. In certain mandates, Japan is reported separately.
Largest foreign equity holdings, 31 December 2010
|% of net assets|
|Exxon Mobil Corp||962||0.4|
The Fund’s alternative investments consist of predominantly unlisted assets with low liquidity. These include real estate, private equity funds, hedge funds and opportunity investments.
The total value of the Fund’s alternative investments at 31 December 2010 was SEK 17.3 billion, which is equal to 7.9 percent of the total portfolio. Overall, the Fund’s alternative investments returned 13.8 percent during the year. Measured in local currency, i.e. without foreign exchange effects, return was 19.3 percent. The largest contribution to return comes from the Fund’s real estate investments, which make up the bulk of alternative investments and have generated high returns. Annualized return on alternative investments over the past five years was 12 percent.
The real estate market showed very strong development during the year. The market value of the Fund’s real estate investments at 31 December 2010 was SEK 11.0 billion. This represents a net increase of SEK 4.3 billion, of which SEK 3.2 billion is attributable to new investments and SEK 1.1 billion to value appreciation. The new investments consist partly of a global investment mandate for real estate equities and partly of the acquisition of residential properties in the newly established and wholly owned real estate company Willhem AB. Första AP-fonden owns 25 percent of Vasakronan, while the remaining 75 percent is owned in equal parts by the Second, Third and Fourth AP funds. Vasakronan’s focus is on long-term management of commercial properties in Swedish growth markets. The Fund’s investment in Vasakronan had a market value of SEK 7.0 billion at year-end 2010 and returned 24.7 percent during the year. Over the past five years, the investment in Vasakronan has produced an annualized return of 15 percent.
At the end of 2010 some 220 properties were acquired in the real estate company Willhem AB. These properties consist of more than 11,000 rental apartments in the Swedish cities of Stockholm, Gothenburg, Malmö, Jönköping, Borås, Karlstad and Linköping with an underlying property value of over SEK 7 billion. The transaction included a total of around 860,000 square meters of real estate, of which 87 percent is residential. Willhem AB is wholly owned by Första AP-fonden.
Private equity funds
The Fund's Strategy for private equity investments is to invest with the most experienced and professional managers. The portfolio of private equity funds consists mainly of partnerships with fund-of-funds participants with customized mandates. There are also a few direct fund holdings. The fund-of-funds program consists of investments in private equity funds globally, in North America, in Europe, and since 2010 also in Asia. In 2010 the Fund extended the investment period in its existing private equity program and thereby increased its investment commitment by SEK 1.8 billion during the year. The direct funds invest in early stage Nordic companies in the telecom, communication and life science sectors.
Development in the private equity market was positive during 2010, with a growing business volume and a modest negative return. Return in 2010 was -1.1 percent, measured in SEK, which is a result of cautious valuation and foreign exchange effects. Return in local currency, without foreign exchange effects, was positive. It is not meaningful to calculate multi-year returns, since few corporate transactions have been executed.
Första AP-fonden’s goal for its private equity investments is to achieve a long-term return in excess of the MSCI World Index +4 percentage points (after expenses).
The investments in hedge funds at year-end 2010 consisted of one holding, Cevian Capital II. Cevian is a so-called activist fund that acquires significant minority ownership positions in undervalued listed companies in Northern Europe. Return in 2010 was 24.2 percent. Over the past five years, the investments have produced an annualized return of 16 percent.
In the past two years Första AP-Fonden has taken advantage of investment opportunities arising in the financial markets in the wake of the financial crisis of 2008, so-called opportunity investments, all of which are fixed income- and credit-related. In 2010 new investments were made in a Swedish debenture, an American bond fund and an Indian bond fund. In addition, the Fund concluded its investment in an American bond fund with good return. The year’s return was 12.7 percent, measured in SEK.
Management mandates in alternative investments, 31 December 2010
Total commitment, millions¹
|Invested amount, millions¹||Starting date|
|Private equity funds||
|Innkap 3 Partners||InnovationsKapital||Nordic||EUR||69||64||2004|
|Innkap 4 Partners||InnovationsKapital||Nordic||EUR||108||68||2006|
|First Private Equity Investments||LGT||Europe||EUR||3,246||1,491||2006|
|First II Private Equity Investments||LGT||Europe, Asia||EUR||830||180||2010|
|WP North America Private Equity||WP Partners||North America||USD||3,159||1,490||2006|
|WP North America Private Equity II||WP Partners||North America||USD||672||72||2010|
|First Stockholm Global Private Equity||Hamilton Lane||Global||USD||269||235||2010|
|Second Stockholm Global Private Equity||Hamilton Lane||Global||USD||1,815||773||2006|
|Third Stockholm Global Private Equity||Hamilton Lane||Global||USD||269||44||2010|
|Cevian Capital II||Cevian Capital||Northern Europe||EUR||361||361||2006|
|BlackRock Public Private Investment Fund||BlackRock||North America||USD||672||514||2009|
|Nektar Special Opportunity||Brummer & Partners||Global||SEK||250||250||2009|
|EW Special Opportunites Fund||Edelweiss Capital||India||USD||269||111||2010|
|Oaktree Opportunities Fund VIII||Oaktree Capital Mgmt||North America||USD||67||33||2010|
|Oaktree Opportunities Fund VIIIb||Oaktree Capital Mgmt||North America||USD||134||0||2011|
Net contribution from external management, unlisted assets (excl. real estate), SEK m
|Gross income: dividends, realized and unrealized value gains/losses||157|
|Paid management fees recognized as part of net result||-33|
|Paid management fees recognized as commission costs||-9|
|Net assets under management, 31 December 2010¹||4,995|
|Invested volume, 31 December 2010¹||4,889|
|Remaining investment commitments, 31 December 2010¹||6,178|