AP3’s core mission is to create value in the Swedish pension system. By assuming responsibility and influencing the companies that we invest in, we make sure to generate the best possible returns for current and future pensioners.
By investing in both listed and unlisted assets locally and globally, AP3 has crafted a diversified portfolio that is more robust in periods of financial uncertainty. Our successful asset management has resulted in high capital growth, which helps ensure stable pension payments. Based on our mandate from the National Pension Insurance Funds Act, we work to an annual percentage return target that guides our investment strategy.
Asset management department
AP3 has an organisation and portfolio structure that are designed to fit together and where roles and responsibilities are clear throughout the organisation. Decisions are taken in order to maximise our ability to deliver profitable and cost-effective asset management over time. We use structured monitoring and rigorous risk management to ensure that this delegating decision-making model works successfully.
The investment organisation has been adjusted to improve the integration of sustainability, to make best use of the Fund’s excellence in asset management and to create the best possible conditions for active management. Investment management is divided into four asset classes: listed equities, fixed income, currencies and alternative investments. The CIO Office, has been established to work on overarching investment management issues.
Clear lines of responsibility
The organisation is designed to achieve AP3’s mission and to create the best conditions possible to reach the targets for return and sustainability set by the board. Strategic positions are taken within the scope of the National Pension Funds Insurance Act to achieve the long-term return target. These positions comprise the AP3 portfolio and encompass listed equities, fixed income instruments and alternative investments, as well as some open currency exposure. The Fund’s investment management teams are tasked with generating returns over and above those of the strategic portfolio. AP3 sees returns from active management as a necessity because the projected return on the different asset classes is traditionally low. The Chief Investment Officer and CIO Office are also involved in active allocations at strategic and tactical level.
The Fund’s investment philosophy comprises the basis for decisions concerning AP3’s investment activities.
|Risk||Taking risks in the financial markets generates positive returns over time|
|Forecasting ability||Returns and risks on financial assets can be assessed using structured analyses|
|Risk diversification||Risk-adjusted returns can be increased by diversifying risks|
|Time diversification||Combining investment decisions with a long, medium and short term investment horizon yields high risk-adjusted returns, thus increasing the probability of achieving return targets|
- Venturing to take risks in the financial markets generates positive returns over time
- Returns and risks on financial assets can be assessed and controlled using structured analyses
- Risk-adjusted returns can be increased by diversifying risks
- Combining investment decisions with a long, medium and short term investment horizon yields high risk-adjusted returns
By combining these, we increase the probability of achieving our return targets in the interest of protecting pensions.
Risks yield returns. The risks that are taken are conscious, intentional and fall within the framework governing our operations.
The risks that are permitted and the level of risk-taking is governed by the National Pension Insurance Funds Act, restrictions adopted by the board of directors, as well as internal limits decided by the CEO. We also maintain a function for independent risk control to ensure that our operations are conducted within the established framework.
AP3’s investment strategy is geared to achieving the annual target return of 3.5% in the long term. We also use structured methods to change the composition of the portfolio by adjusting levels of risk to reflect prevailing market conditions. Our objective is always to ensure healthy returns, which helps create a stable pension system.
AP3’s high returns help keep pensions stable.
The investment strategy is built on procedures and structures that must be sustainable over time to generate returns at a reasonable level of risk. Risk can be defined as a future negative deviation from an expected outcome.
Strategic and tactical allocation
Since the allocation of capital and capital-free strategies is the single most important factor for AP3’s investment returns over time, we place considerable emphasis on dynamic allocation in our strategy. This also entails greater flexibility to adapt risk levels to market conditions. Allocation decisions are made on the basis of five asset classes.