Swedish Pension Fund AP6 Returns 12.3% in 2017

Annual return nearly doubles earnings from previous year.

Sweden’s Sixth National Pension Fund, also known as AP6, reported a net profit of SEK3.47 billion ($420 million) in 2017 for a 12.3% return, which was nearly twice the 6.5% the fund earned in 2016. Internal management costs totaled SEK86 million.

“The funds and companies that AP6 has invested in have performed extremely well during the year,” said the fund in a release. “The return on capital employed in these unlisted investments has delivered a record high return of 20.3% for the year.”

Over the last five years, AP6’s annual return on employed capital has been 11.6%, which it said is above the average for the European Private Equity sector.

AP6 was established in 1996 as a closed fund, so there are no inflows or outflows of capital linked to the rest of the Swedish pension system. It is also the only Swedish national pension fund that by law specializes in investments in companies that are not listed on any stock market.

The results for 2017 are the first full year since the fund completed its portfolio alignment, which had been initiated in 2011. The move was based on a decision by AP6’s board of directors to follow a new investment direction. Holdings that did not conform to the new direction were gradually divested. 

“The return that was generated during the year is a result of conscientious efforts to restructure the portfolio and there has been a high rate of investment over the last five years,” said Karl Swartling, managing director at AP6. “Also in 2017, a steady flow of attractive investment opportunities from both existing and new partners has resulted in several new investments.”

The fund says it makes its own active decisions concerning investments, which means it avoids external management costs or profit sharing. This allows AP6 to lower the average external management cost for the total amount of capital employed via cooperation with a specific fund.

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