AP1, AP3 and AP4, the Stockholm-based buffer funds managing capital for the Swedish state pension system, reported good returns in 2023.
AP1, with 454.4 billion Swedish kronor ($45 billion) at the end of the year, returned 9.1%, helped by public equities and fixed income that offset negative returns from real estate, infrastructure and private equity, the fund reported Feb. 22.
The fund's 10-year annualized return averaged 5%, compared with its 3% target.
Kristin Magnusson Bernard, CEO of AP1, said in a news release about its annual report that the fund gradually increased equity allocations and duration in 2023 after holding more conservative positions in 2022. That paid off, as did increased currency hedging later in the year, she said.
The fund also continued "its important work in the area of sustainability in 2023," including stewardship activity and climate targets, Bernard said. Since 2019, the public equity portfolio's carbon footprint decreased by 64% by the end of 2023.
AP3, with 500 billion kronor, returned 7.8% in 2023. Highlights noted in its annual report released Feb. 22 included a new system infrastructure and action plans for corporate governance, climate, human rights and biodiversity.
Staffan Hansen, CEO of AP3, credited global equity markets but noted "several bumps in the road that had investors fluctuating between hope and disappointment," he said in a statement.
AP3's annualized returns over five and 10 years were 9.6% and 8.7%, respectively.
AP4, with 499.6 billion kronor, returned 9.1% in 2023, according to a Feb. 23 news release. Its full annual report will be available in March.
Niklas Ekvall, CEO of AP4, said in the news release that the good return came from favorable financial markets and ongoing management work. "To a significant extent, this is also due to our many years of work to continuously improve the portfolio's return and risk characteristics," Ekvall said. The fund's costs were 37% lower than corresponding pension funds internationally, he said.
Last year also saw the fund update its views on key sustainability trends. "An increasing share of AP4's portfolio consists of investments with a specific focus on the sustainability transition," he said. "The ambition is to refine our tools and strengthen our expertise in order to identify investment opportunities that are expected to provide a good return in the long term, while making a tangible contribution to the transition."
AP4 reduced its carbon emissions by 11% compared with 2022, and by 65% since 2010.
AP2, Stockholm, previously reported it had returned 5.9% in 2023, thanks to strong equity returns that offset weak real estate performance. A detailed report from the 426 billion kronor pension fund will be available in March.
