Sweden’s Första AP-fonden (AP1) made a return of 5 per cent in the first half of 2024, equal to a net income of SEK 22.7bn.

Publishing its half-year results, AP1 said global equity markets performed strongly while unlisted asset valuations stabilised in the first half of 2024 contributing to its positive result. It also highlighted the strong US economy and slowly easing inflationary pressures as the main drivers of optimism among companies and investors, despite fewer expected interest rate cuts and repeated postponements.

The fund now has SEK 476.2 assets under management, as of 30 June 2024.

Commenting, AP1 CEO, Kristin Magnusson Bernard, said: “We have consistently exceeded our target of 3 per cent real return over rolling ten-year periods, with an average return of 4.8 per cent over the past ten years. Positive contributions in the first half of 2024 came from listed equities, while the returns from unlisted assets such as real estate, private equity investments and infrastructure assets stabilised.”

In addition, Magnusson Bernard said AP1’s continued focus on cost efficiency has led to a maintained low management expense ratio of 0.06 per cent. Since 2019, the fund has reduced its costs by approximately SEK 650m.

Discussing its investment strategy, Magnusson Bernard said AP1’s management has adapted investments in both individual companies and in overall allocation to fixed income, currency and equity assets worldwide to create value in the current market environment.

“A larger share of equities in the portfolio, a thoughtful allocation strategy, and successful company selections within Swedish listed equities had a particularly positive impact on net investment income. Reduced uncertainty ahead led to a stabilisation of the valuations of unlisted assets, as expectations regarding future interest rate levels over the longer term are an important factor in the discounting of future cash flows,” he said.

The AP1 CEO also referenced the Swedish government’s annual evaluation of the AP funds, which included a special focus on their investments in unlisted assets.

“It was concluded that the returns we have generated are higher across different timeframes compared with international pension funds considered to be world-class. The evaluation also highlighted that our costs have been substantially lower compared to international peers and that our ESG work is of a high standard,” he said.

“This evaluation provides a clear confirmation that our asset management model, and how we carry out our mandate, have created value for the income pension system. Evaluation and transparency are important aspects of our work to retain the trust of the general public and other stakeholders.”

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