Första AP-fonden

Första AP-fonden (AP1) delivered a return of 9.7 per cent and reduced its carbon footprint and costs considerably in 2020.

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During a challenging year AP1 delivered a high return of 9.7 per cent after costs, with net investment income amounting to SEK 34.8 billion. SEK 7.9 billion were transferred to the national income pension system. The Fund’s year-end assets under management amounted to SEK 392.6 billion. Costs were cut by SEK 123 million, a decrease of 29 per cent year-on-year, and the equity portfolio’s carbon footprint was reduced by 46 per cent during the same period.

CEO Kristin Magnusson Bernard comments on the results:

“I am incredibly proud of the Fund’s employees, who with great commitment have delivered on all aspects of our mandate –high returns, ambitious cost efficiency and sustainable value creation. During a challenging year, we have successfully steered the portfolio as well as nimbly adjusted both our exposures and our work practices. The Fund’s delivered return of 9.7 per cent comfortably exceeds the long-term goals set by our Board of Directors. The Fund’s costs were cut by SEK 123 million year-on-year, which puts us considerably below our peer benchmark.

Our sustainability work has also taken great strides forwards. The Board of Directors’ decision to stop investing in companies with fossil-fuel businesses was implemented during 2020, which led to a reduction of our listed equity portfolio’s carbon footprint by 46 per cent as well as reduced its financial risk. All of our asset management teams have further integrated sustainability aspects into their mandates during the year. In fruitful collaboration with our external asset managers, we have developed new sustainable, fossil-free funds which are also available to other investors. We have also set ourselves the goal to considerably increase our share of dedicated investments which serve to promote the UN’s Sustainable Development Goals. As a major shareholder we also continue to practise responsible active ownership.

Looking ahead, we foresee continued complexity coupled with material uncertainty for global financial markets. The strong equity market performance during last year stands in sharp contrast to the situation in the service sector and parts of the labour market. These dispersed effects of the pandemic will probably linger, and affect us for a long time to come. How monetary and fiscal stimulus measures play out, together with the impact of geopolitical tensions, will be of crucial importance to markets, corporates and international trade going forward. Structural changes, such as the ongoing process of digitalisation and the shift towards a climate-neutral economy, will also continue to be driving forces.

Despite the uncertain future ahead, we feel confident in our ability to deliver on our mandate. Responsible investing and an active advocacy agenda will continue to help us produce both financials returns and shape our contribution to the sustainable transition of society,” concludes Kristin Magnusson Bernard, CEO of AP1.

Key ratios

31/12/2020

31/12/2019

Closing net assets, SEK bn

392.6

365.8

Net investment income for the period, SEK bn

34.8

48.6

Net flow to the pension system, SEK bn

-7.9

-6.5

Opening net assets, SEK bn

365.8

323.7

Expense ratio, operating expenses, %

0.06

0.07

Expense ratio, commission expenses, %

0.02

0.05

Total expense ratio, %

0.08

0.12

Return after expenses, %

9.7

15.1

Real return after expenses, %

9.2

13.4

Annualised return after expenses, 5 years, %

8.4

7.3

Annualised return after expenses, 10 years, %

8.0

8.1

Real annualised return after expenses, 10 years, %

7.0

6.9

AP1’s 2020 Annual Report can be found in Swedish here, and will be available in English here on 15 March.

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About Första AP-fonden

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Första AP-fonden (AP1)

Första AP-fonden (AP1) is one of five pension funds in the Swedish national income pension system (the AP Funds). AP1 has assets under management of SEK 393 billion (31 December 2020) in a portfolio consisting of listed equities, fixed income securities, currency, real estate, hedge funds, private equity funds, infrastructure and high yield. Investments are made worldwide. AP1 is a long-term investor and an active, engaged owner. As an owner the Fund imposes stringent demands in the areas of Environment, Social and Governance. www.ap1.se