Investment model
Första AP-fonden's investment model is oriented on increasing the focus in strategic allocation.
The foremost task of the Fund's internal management is to determine and steer the composition of the portfolio, the strategic asset allocation. Through asset allocation, the Fund is expected to meet its overal annual return target of 5.5 percent after expenses. This allocation should also build a portfolio that is diversified and can withstand different macroeconomic scenarios - a portfolio with low risk.
The investment model should be long-term but at the same time flexible, which means that portfolio management must be dynamic and autonomous. The Board of Directors' role is to specify the long-term goals and framework, while the investment organization's responsibility is to formulate and implement strategies to meet the Board's long-term objectives. The three most important factors are long-term value creation, professionalism, and to be a dedicated owner.
The target portfolio specifies the direction
The target portfolio is a forward-looking, desired portfolio that specifies the distribution of equities, bonds and alternative investments in the Fund's investments over the coming 18-month period. The Fund's currency exposure is also decided within the target portfolio.
Analysis in several steps
To design the target porfolio, the Fund studies a number of different scenarios and analyses. The Fund's Investment committe continuously gathers information and assesments that provide a basis for analysis if existing and new strategies. In this process, the interplay between the various investment units, with experience and knowledge in their respective areas, is of central importance. The scenarios are discuessed in the Investment committe.
The analyses examine several different time horizons. When studying development in the pension system, the horizon is longer than 40 years. In addition, a cyclical time horizon of five years is used. Shorter time horizons are also used to assess market trends and market valuation.
The Investment committe develops strategies and action plans o steer the Fund's portfolio toward the target portfolio with consideration to market development and other conditions. The target portfolio is reviewed at least once a year and the Fund's asses allocation unit is responsible for ensuring that such changes are prepared and implemented.