Celebrating its 50th anniversary this year, AP4 can boast an average return of 13% per annum since inception, and assets of SEK533bn (€46.2bn) at 30 June 2024, at which date it had transferred a total SEK58bn into the Swedish public pension system in its role as a provider of liquidity.

AP4’s purpose in supporting the Swedish pension system means that it has a very long investment horizon, of up to 40 years. This provides unique opportunities to manage volatility for the benefit of higher returns, while maintaining the fund’s resilience. AP4 therefore holds a significant equity allocation made up of global equities (39%) and domestic equities (16%), as well as real assets (16%), including real estate and infrastructure, with the rest almost wholly in fixed income.

Based on an assessment showing that internal management can achieve equal or better returns after costs than can outsourcing, 79% of AP4’s assets were managed internally, and 21% externally, as of December 2023. The size of AP4’s assets under management allow for economies of scale without restricting investment opportunities; management costs are currently 0.08% of net assets.

AP4 believes that its active management of equities enhances long-term real returns. Given its comparative advantages in different markets, several different routes are used to achieve this:

• Global equities are run as structured alpha-beta separation, where beta and risk factors, such as sustainability, are managed cost-efficiently inhouse.
• External long-short equity market neutral hedge funds provide cost-efficient risk-adjusted alpha.
• The alpha-beta separation strategy is complemented in emerging markets by long-only managers with a focus on different sustainability themes.
• For Swedish equities, AP4 exploits its local knowledge and the ability to influence the companies that it invests in as a long-term owner. The relatively large allocation reflects Sweden’s strong economic fundamentals.