● Fjärde AP-fonden's (AP4) long-term perspective starts with its ALM study, which it reviews every three years and was updated in 2023. Because of the strong balance sheet and a diminishing remaining period of outflows from the system, it is better to lower the expected return slightly than to increase the risk level in the investment portfolio. These assessments have led to the decision to keep AP4’s long-term real return target over 40 years at 3.5%.

● In 2022, AP4 introduced a new asset class, defensive equities, to its dynamic normal portfolio (DNP), the benchmark portfolio used for operative asset management. The new category makes up 5% of the DNP, funded from fixed income and global equities. These stocks are weighted differently from a market-weighted index to add return potential and provide stabilising characteristics in markets where the probability of negative scenarios has risen. This brought success in 2022, when AP4’s global equities portfolio lost 19%, while defensive equities fell by under 4%.

● AP4 has taken full advantage of new regulations allowing increased allocations to illiquid real assets. The asset class has increased from 12% of fund capital in 2019 to 18% today. In 2019, this exposure came mainly from real estate, but the ensuing increase was largely in new investments in infrastructure. The reallocation is part of a planned change to increase exposure to long-term stable real cashflows through diversification.

● AP4 is continuously analysing sustainability trends, searching for investment opportunities in this area which also provide a high long-term financial return. An extensive update of its thematic analysis, completed in early 2023, identified five main investment themes: fossil phase-out in energy systems, cleaner industry, fossil-free transport, thriving biospheres and green buildings and infrastructure. Over the past three years, AP4 has invested or committed €2.5bn within these activities.