The Third Swedish National Pension Fund (AP3) is changing the reference index for its global equity holdings from the FTSE All-World Index to the new FTSE Global Equity Index Series, which also covers the small cap segment.
As a consequence of this change in index structure, AP3 has restructured its external European equity mandate to follow the FTSE Developed Europe index. This index is divided into three market cap brackets: large cap, mid cap and small cap. AP3’s European equity portfolio totalled SEK 25.2bn at year-end 2003, of which SEK 9.2bn was managed externally.
The European large cap segment will be managed internally (actively) and externally (passively by State Street Global Advisors), as in the past.
European mid cap is introduced as a new separate mandate and will be managed actively by a combination of three managers from AP3’s universe of contracted asset managers. Those appointed are AXA Rosenberg Investment Management Ltd, BNP Paribas Asset Management and Kempen Capital Management.
The European small cap mandate will be managed by two managers. Those appointed are JP Morgan Fleming Asset Management and Pictet Asset Management. The reference index will be FTSE Developed Europe Small Cap Index ex Investment Companies.
AP3 manages SEK 140bn (EUR 15bn) of the buffer fund capital in the Swedish national pension system. Approximately 30 per cent of the capital is managed externally under a multi-manager approach. AP3 is an active “manager of managers”, making reallocations within a pool of leading managers with which we have contracts. Allocations between managers are based on risk budgeting considerations. The aim is to diversify risk and to generate active return to AP3 through an optimal mix of managers.