Frequently asked questions
What is AP3’s mandate?
AP Funds 1-4 are part of Sweden’s national pension system. The Funds’ mandate is to manage fund capital to maximise benefit for the pension system by generating high returns at a low level of risk. The AP Funds have two roles: they serve as a buffer for future pension payments, with generated returns contributing to the pension system’s long-term financing.
An overview of all AP Funds, including Fund mandates, is available at apfonderna.se
AP3’s capital accounts for what percentage of the pension system?
The buffer capital (AP1, AP2, AP3 and AP4) account for approximately 15% of all assets in today´s pension system. AP3 account for around ¼ of these assets; i.e., approximately 2.5%. The remaining 90% of the pension system’s assets are not managed by the AP Funds and are not exposed to the financial markets.
How is AP3 managed?
AP3 has its own board of directors, appointed by the government. The board has full responsibility for Fund operations. This includes taking decisions on investment policies, ownership policies and risk management plans. The board delegates responsibility for operating activities to a CEO, much like a limited company does. The board reports on its work annually in a Fund Governance Report, included in AP3’s Annual Report.
The Fund differs from other government agencies in its autonomy from central government. Its operations are almost entirely prescribed by statute and the government has waived its regulatory oversight. AP3 is evaluated by the government every year, with the evaluation carried out by Finance Ministry officials and presented in written format to Parliament.
Who sits on AP3’s board of directors?
The AP3 board of directors has nine members, all appointed by the government. Two directors are appointed from nominees of employee organisations and a further two from nominees of employer organisations. The government appoints the Chairman and Deputy Chairman from nominees of labour market parties. AP3’s board of directors.
How much capital does AP3 manage?
As at 31 December 2019 AP3 managed fund assets totalling SEK 393.7 billion.
What return has the Fund generated since its inception?
The Fund started out in 2001 with capital of SEK 134 billion. Fund capital totalled SEK 393.7 billion at 31 December 2019.
What are AP3’s goals?
AP3’s mandate in the national pension system sets standards for the return the Fund must achieve on assets under management. In order for the Fund to cover future pension payments and make a positive long-term contribution to the pension system, the Fund needs to generate a real annual return (i.e., return less inflation) of at least 3.5 per cent. AP3 calculated this performance target by analysing the anticipated future development of the pension system’s assets and liabilities. With a real return in excess of 3.5 per cent, it is presumed that the pension system is strong and that balances to the system will be avoided in future.
How has AP3 performed in relation to its long-term goal?
Over the last 10 years (2010-2019) AP3 has recorded an annual average return of 7.4% in real terms (after allowing for inflation). Thus, AP3 has outperformed its long-term goal of 3.5 per cent real annual return on average. The Fund has made a positive contribution to the pension system by outperforming the income index (index used to calculate pension entitlements).
What assets does AP3 invest in?
AP3 has a well-diversified global portfolio that includes listed shares, unlisted shares, forestry holdings, property, interest-bearing assets and various opportunistic investments such as agricultural land and insurance-related investments.
What individual shares and other assets does AP3 own?
AP3 publishes all of its individual securities holdings (such as individual shareholdings) at 30 June and 31 December in conjunction with publication of its semi-annual report and annual report. Securities holdings are listed on the Fund’s website.
How does AP3 work with corporate governance?
The Fund uses the following main means of exercising its responsibility as owner:
- Participation in nomination committees
- Dialogue with boards of directors and corporate management
- Exercise of voting rights at shareholder meetings
- Playing an active role in developing the self-regulatory system through participation in forums such as the Institutional Owners Association and the Swedish Corporate Governance Board
- Contacts and co-operation with other Swedish and foreign owners
- Environmental and ethical consideration
How does AP3 vote at shareholder meetings?
During the third quarter of each year, AP3 publishes a report on the Fund’s performance in various owner issues, including the Fund’s voting record. The report can be downloaded from the Fund’s website.
How does AP3 exercise ethical and environmental responsibility?
In AP3’s view, there is a connection between a company’s responsible action and its ability to deliver long-term shareholder value. The Fund’s core values are based on international conventions ratified by the Swedish government and on support of initiatives such as the UN’s Global Compact and OECD guidelines for multinational companies.
AP3 exercises ethical and environmental responsibility by analysing companies to identify those that may be associated with infringement of international conventions, and through active dialogue. Dialogue with foreign companies is conducted primarily through AP1-AP4’s joint Ethical Council.
AP3’s proactive dialogue with Swedish companies involves, among other things, ensuring that managers of the companies the Fund invests in identify and address social and environmental risks in a way that creates value for shareholders.