Through responsible investment and management of the buffer capital, we help protect Swedish public pensions for current and future pensioners.
The Third AP Fund is one of five funds tasked with helping protect the Swedish public pension system for current and future pensioners through responsible investment and management of the pension buffer.
AP3’s overarching mission is to manage the fund capital in the best interests of the income pension system by generating high returns at low risk. This allows the Fund to live up to its two core roles in the pension system: to serve as a buffer in the event of an imbalance in inflows and outflows in the system, and to help create stability in the pension system.
We create favourable means for successful asset management by constantly remaining focused on the target. The commitment to the pension system is based on the mission stipulated in the National Pension Insurance Funds Act (in swedish).
By investing in both listed and unlisted assets locally and globally, we have crafted a portfolio that is more robust in periods of financial uncertainty than a traditional portfolio exclusively comprising listed equities and bonds.
Meeting our target since inception in 2001
Over time, pension assets and pensions are calibrated with the income index to illustrate adherence with wage developments in society at large. The income index is a measurement of the average income in Sweden and is calculated on the basis of the average of all pension-entitled income for individuals aged 16-64.
Making a difference through asset management
For AP3 it is important to create long-term value when selecting our investments and managing our portfolio. Asset management also comes with a responsibility to act sustainably and this is now fully integrated in our investment operations – from corporate stewardship through to responsible environmental and social governance.
AP3 manages SEK 340.7 billion of assets (as of 31 December 2018) in a globally diversified portfolio comprised of listed equities, fixed income securities and alternative investments such as private equity, real estate, timberland and infrastructure assets.
Overall objective/business concept
AP3’s mission is to generate maximum possible benefit for the current and future pensioners through responsible investment and management of the pension system buffer.
As a manager of the Swedish public’s pension assets, the Third AP Fund works diligently with its portfolio to ensure pension disbursements, and we have achieved our 4% annual return target since our inception in 2001. The Fund’s strength, which is a measure of how many years buffer Funds will sustain pension disbursements if the Funds fail to receive additional assets from pension fees or to generate returns, has averaged 4-5 years since 1990 and will remain at a high level.
AP3’s performance as at 31 December 2018
- AP3 reported a net result of SEK 2,202 million (28,239) for the 12 months ended 31 December 2018.
- Return totalled 0.7% (8.9) before expenses and 0.6% (8.8) after expenses.
- AP3 made payments of SEK 6,773 million (7,375) to the pension system during the year.
- Fund capital at year-end was SEK 340,668 million (345,239).
- AP3’s average annual return in the last five years stands at 7.8%. The income index, the reference used to keep pension credits and pensions in line with average wage increases, has risen by an annual rate of 2.0%.
- In 2018 the Fund achieved the four sustainability goals set in 2014, including doubling strategic sustainable investments – which now stand at SEK 28.5 billion.
- Since inception in 2001, AP3 has outperformed its long-term target of an annual average real return of 4%.