Internal management

The Fund’s internal management invests in Swedish and non-Swedish listed assets and is divided into three different investment units: asset allocation, equities and fixed income/foreign exchange. At year-end 2010 the Fund had assets of SEK 123.3 billion under internal management, equal to 56.3 percent of total net assets.

Asset allocation

The asset allocation unit is responsible for overall risk in the portfolio and ensuring that the portfolio has the desired orientation. The unit conducts research relating to the portfolio’s strategic objectives and reallocates assets to change the portfolio’s structure and risk profile in accordance with the decided strategies. It’s activities are governed by a mandate from the Fund’s investment committee. The unit is also responsible for tactical implementation of the portfolio strategy. This provides scope for short-term changes, for example in the portfolio’s equity and currency risks.

The strategic focus in 2010 was among things on increasing investments in emerging markets. In the developed countries, several exposures to individual countries were reviewed. As a result of the foreign exchange analysis, all open exposure to the euro was eliminated. Equity exposure in the portfolio was increased during the year for tactical reasons.


Internal equity management is divided between two portfolios, one Swedish and one European, and an absolute return portfolio in both Sweden and Europe.

The investment process is based on a long-term horizon with fundamental analysis of expected earnings growth, stock valuation and risk. In 2010 the portfolios were further concentrated in fewer holdings and, for reasons of liquidity, are weighted mainly in large and mid cap stocks.

At 31 December 2010 the Swedish equity investments amounted to SEK 34.4 billion, an increase of SEK 6.5 billion compared to the previous year. Return on Swedish equities was 27.6 percent, which is equal to a net investment earnings of SEK 8.2 billion. Return benefited from a strong market with sharp upswings mainly for business cycle-sensitive stocks like Volvo, Atlas Copco and SKF. The equity investments in Sweden produced clearly above the markets thanks to a combination of successful stock picking and sector selection. Annualized return over the past five years has also been above the market.

Largest Swedish equity holdings, 31 December 2010
Company Market value,
% of net assets
HM B 3,586 1.6
Volvo A and B 3,093 1.4
Nordea 2,730 1.2
Atlas Copco A and B 2,320 1.1
Ericsson A and B 2,224 1.0
Largest voting rights in Swedish holdings, 31 December 2010
Company Market value,
% of votes
TradeDoubler 111 5.2
Intrum Justitia AB 228 2.7
ABB Ltd 949 2.0
SSAB Svenskt Stål AB 578 1.8
Autoliv Inc. 455 1.8

At the end of 2010 the Fund had European equities under management for a value of SEK 21.4 billion. a decrease of SEK 2.1 billion compared to 2009. The Fund’s European equity investments generated a return of 6.6 percent during the year, which corresponds to a net investment gain of SEK 1.7 billion. Strong development for Industrials, Materials, Consumer Discretionary and Consumer Staples and successful stock selection in areas like the industrial and oil sectors contributed to clearly above the market. Annualized return over the past five years has also been above the market.

At the end of the year the Fund introduced a portfolio focused on absolute return, consisting of some 15 stocks in Sweden and Europe with expected long-term fundamental values significantly exceeding their current market prices and relatively stable earnings. The mandate also provides an opportunity to reduce equity exposure, which gives the Fund certain scope to hedge for stock market downturns. Performance is evaluated on a long-term basis against a absolute return requirement that is not index-related.

Fixed income and foreign exchange

This unit is responsible for both management of the Fund’s bond portfolio and currency hedging of the Fund’s foreign assets. The bond portfolio consist of both nominal and index-linked bonds issued by governments, intermediary institutions and companies with high credit ratings. The Fund has limited holdings of bonds with a rating of BBB or lower according to Standard & Poor’s.

In addition, the unit has continued the process of integrating the Fund’s fixed income and foreign exchange management, which were merged in 2009. This has been accomplish both through the implementation of a joint risk system and by joint market analysis for both asset classes.

The unit performed an extensive scenario analysis of expected returns in the global bond markets over the next few years. The analysis is part of the Fund’s investment process, but is also aimed at extending the unit’s forecast period in day-to-day operations.

In 2010 the bond portfolio delivered a return of 4.8 percent, equal to a net investment gain of SEK 3.4 billion. Return on fixed income investments was marginally above the market in 2010. Annualized return over the past five years has been clearly above target. At 31 December 2010, the market value of the internally managed bond portfolio was SEK 59.4 billion, an increase of SEK 0.5 billion.

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