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AP3 posts 9.5% return in 2016, doubles green bond holdings

AP3, Stockholm, returned 9.5% in the year ended Dec. 31, as assets increased 7% to 324.4 billion Swedish kronor ($35.7 billion).

The return was up from 6.9% in 2015.

The pension fund said in a financial update it outperformed its benchmark long-term status profile by 2.3 percentage points over the year. That portfolio was introduced in 2012, and the fund has outperformed its benchmark by an annual average of 3.3 percentage points over the past five years.

AP3 more than doubled its holdings of green bonds over the year, to 9.5 billion kronor from 4.5 billion kronor.

AP3 said its equities, inflation and currency risk categories made the largest positive contributions to returns.

The fund’s website showed a 51.5% exposure to equities, which returned 8.1% for the year. The inflation risk category carries a 21.2% exposure, and returned 15.2%; fixed income had an 18.6% exposure and returned 2.5%; the currencies risk and absolute-return categories had 17.5% and 10.3% exposures, respectively, and both recorded flat returns. The remaining 7.4% of the fund is allocated to credit, which produced a 3.8% return. Exposure is defined by the pension fund as “underlying market value that is exposed to changes in value arising due to market movements. Use of derivatives to manage risk and bring greater efficiency to asset management operations may result in exposure being greater or less than total fund capital,” according to AP3’s website.