The Fund’s return after expenses for 2021 amounted to 20.8 per cent, the highest figure in the 20-year history of the Fund. Through active decision-making and well-utilised risk mandates the Fund benefited from high market activity which led to Första AP-fonden (AP1) reporting a net investment income of SEK 80.7 billion. The result further strengthened the Swedish income pension system and increased AP1’s total net assets to SEK 466 billion. Cost-efficiency improved further and the Fund’s sustainability work continues to evolve.
The Fund’s CEO Kristin Magnusson Bernard comments:
“We are delighted to report the highest return and net investment income in our 20-year history on the capital that has been entrusted to AP1 by today’s and tomorrow’s Swedish pensioners. 2021 was characterised by strong economic recovery and an increased focus on climate issues, along with intense market activity with rapid shifts between healthy risk appetite and inflation concerns. The overall direction was upwards, with shorter interruptions when concerns about the pandemic flared up. Our strategy was to allocate capital actively and act quickly to achieve desired exposures for the Fund as the market sentiment changed.
Formulating strong views, daring to act on them and constantly challenging them have been critical success factors for us during the last year, and will remain so going forward. Short-term, tactical decision-making facilitates taking advantage of long-term opportunities. I am proud of how our employees have constantly challenged each other and questioned strategies and exposures during the year, allowing for continuous adaptation of our risk-taking. The Board of Directors provided us with the necessary governance in the form of well-defined strategic frameworks and risk mandates. Through our continued focus on cost-efficiency we also further reduced our expense ratio this year.
Promoting sustainable development is a core aspect of our mandate and this year the Board adopted a new ESG strategy. We also took further steps towards our goal of a carbon-neutral portfolio by 2050 with an 11% reduction in the carbon footprint of our listed equity portfolio. The companies in the portfolio reduced their carbon emission footprint by 7%. It is increasingly obvious that the climate transition might affect various aspects of sustainability, such as environmental and social sustainability, in different ways. For us as investors as well as for others, it will therefore be important to make the right trade-offs and set priorities to ensure that, as far as possible, achieving one sustainability goal does not happen at the expense of another. Major flows of capital need to be reallocated in a complex and dynamic market in which information supporting decision-making are less comprehensive than we are used to. Increased clarity of how the transition is intended to actually be achieved, such as guidance from COP26 and the EU taxonomy, facilitates for investors to contribute to market developments that in themselves are sustainable, profitable and preserve financial stability.
If 2021 was the year of recovery, we are now heading towards reductions in monetary and fiscal stimuluses around the world. The economic cycle is maturing quickly, and central banks have started to unwind their asset purchases in various ways ahead of future interest rate increases. When, and if so by how much, inflation falls back will affect both how decision-makers react and risk appetite in financial markets. Geopolitical tensions and energy dependencies are likely to continue influencing markets and investors also going forward. We will continue to act both upon unexpected events and long-term trends, such as the climate transition and digitalisation, in a way that creates value.
When I look back on my first 18 months as the CEO of AP1, I feel incredibly proud of all our employees and what we have achieved with the support of our Board of Directors. I am happy to see how our working as a team helps us reach our full potential by collaborating across different areas of competence. We are well equipped to fulfil our mandate going forward with even greater success”, concludes Kristin Magnusson Bernard, CEO, Första AP-Fonden.
|Closing net assets, SEK bn||465.8||392.6|
|Net investment income for the year, SEK bn||80.7||34.8|
|Net flow pension system, SEK bn||-7.5||-7.9|
|Opening net assets, SEK bn||392.6||365.8|
|Expense ratio, operating expenses, %||0.05||0.06|
|Expense ratio, commission expenses, %||0.02||0.02|
|Total expense ratio, %||0.07||0.08|
|Return after expenses, %||20.8||9.7|
|Real return after expenses, %||16.9||9.2|
|Annualised return after expenses, 5 years, %||10.6||8.4|
|Annualised return after expenses, 10 years, %||10.3||8.0|
|Real annualised return after expenses, 10 years, %||9.0||7.0|
|Carbon footprint of the equity portfolio, tCO2e/SEK m||8.2||9.3|
Download Första AP-fonden’s 2021 Annual Report here (in Swedish).
Kristin Magnusson Bernard, CEO Första AP-fonden, tel. +46 (0)8-566 202 00
Sara Christensen, Head of Communications, Första AP-fonden, tel. +46 (0)70-968 12 50, firstname.lastname@example.org.