The Fourth Swedish National Pension Fund (AP4) achieved a return of 10.1 per cent after expenses in 2024, its annual report has revealed.

It reported a result of SEK 50.7bn, while its fund capital rose to SEK 548.2bn after SEK 2bn was transferred to the pension system during the year.

Over the 10 years from 2015 to 2024, AP4 averaged a return after costs of 8 per cent a year.

The pension fund’s accumulated result over the same period was nearly SEK 313bn, and the fund has transferred just over SEK 59bn to the pension system.

AP4 CEO, Niklas Ekvall, said that while 2024 had represented a good return for a its “broad and well-diversified portfolio”, the year was also characterised by a one-sided market.

“A significant portion of capital flowed to the US, resulting in a strong US dollar and a US stock market that outperformed other major stock markets,” Ekvall stated.

“Due to the uncertain economic situation, AP4 has worked intensively for a number of years to increase the diversification and robustness of the portfolio.

“The ambition has been to maintain the portfolio's long-term return potential, while offering better protection against the negative scenarios that we have identified.

“An example of this is the defensive equities asset class, designed to provide relatively good characteristics in more challenging economic environments.”

Ekvall noted that the pension fund had implemented a diversified investment strategy that has a “fairly large” allocation to equities to meet the return it requires in the long term.

However, with a strategy that has a broad allocation to equities, it was “inevitable” that some individual investments would perform poorly, even if the portfolio had a good return overall.

“The alternative would have been to invest the entire fund capital in fixed-income assets with very low risk, but also a significantly lower expected return,” Ekvall stated.

Earlier this year, the government confirmed that it would be pushing ahead with plans to reduce the number of AP funds and to improve the competence requirements for AP fund boards.

“It is now our mission to implement the proposed change with full force and great commitment in the best way for the pension system,” Ekvall said.

---