SWEDEN – Citing the continued downturn in equity markets, Tredje AP-fonden, the third national Swedish pension fund or AP3, has recorded what it has termed a “painful” negative return of 12.6% for 2002.

“At end-2002, the market value of AP3's fund capital amounted to 120.2 billion crowns (13.16 billion euros) (including a net capital inflow of five billion crowns), compared with 132.7 billion crowns (14.5 billion euros) at the start of the year,” the pension fund said in a statement.

AP3 has followed its sister fund AP2, which last week announced a 15.3% decline in its assets for 2002 to 117.1 billion crowns (12.8 billion euros).

"Although the year-end figures can be explained by the general fall in equity markets, it is always painful to report a shrinking fund capital,” said the fund’s chief executive Tomas Nicolin. “Meanwhile, I am glad to report that AP3's asset management outperformed the market in both 2001 and 2002."

“Asset management income amounted to -17.5 billion crowns, of which the greater part refers to unrealised capital losses.”

AP3 said it outperformed its benchmark by 0.6 percentage points before costs. “This means that the fund's active asset management reduced the potential loss by approximately 700 million crowns.”

Its management costs came in at 177 million crowns or the equivalent of 0.14% of managed assets.

Swedish equities were its worst performing asset class, with a negative return of 33.9%. But AP3 said its active management led to a “relative outperformance” of two percentage points.

AP3’s directors approved a couple of minor adjustments to the fund's long-term asset allocation, or the reference portfolio, for 2003.

The share of real estate is to be increased by 0.5 percentage point and Japanese bonds will be removed from the portfolio.

AP3 is one of four independent buffer funds in the Swedish pay-as-you-go public pension system.

Topics