Our investments are governed by law
Legal requirements are the foundation of the Fund’s operation Investments are selected under controlled forms, in line with frameworks that are broken down into several sub-levels.
AP1 is a Swedish Government authority and its operations are primarily regulated by the National Pension Insurance Funds (AP Funds) Act. The act states that the Fund has three different objectives. The first objective is that the funds should be invested so as to achieve a high return in the long run. The second objective is that the funds should be invested in an exemplary way through responsible investment and responsible conduct. The First – Fourth AP Funds have jointly agreed on how this should be interpreted and on common core values. The third objective is that the Fund should be sufficiently prepared to be able to transfer funds to the Swedish Pensions Agency as required. This act also defines how we may distribute our investments across different types of asset. Alongside the formal requirements, we also choose to work in line with relevant frameworks in areas such as sustainability and active ownership.
The Fund’s board of directors is appointed by the Swedish Government, via the Ministry of Finance. The board’s overriding demand of the organisation is that we should manage our proportion of pension assets to ensure that the fund’s medium-term return target on the total portfolio after costs is 3.0 per cent real per year measured over rolling ten-year periods starting in 2020. The long-term return target (over 40 years) is 4 per cent average annual real return after costs. The board also decides what level of financial risk the Fund should take.
The board’s requirements are summarised as guidelines for an overarching division of assets into equities and fixed-income investments.