Monitoring of return, risk and expenses

Första AP-fonden’s investment process and management performance are monitored and evaluated by the Fund’s Middle Office function. The results in the form of return and risk are monitored at different levels. Aside from the overall level, i.e. total return, the Fund also monitors its three decisions levels – strategic allocation, strategic management and operating management.

At the overall level, the Fund’s return and risk are reported in relation to the target of a 5.5 percent return after expenses over rolling five-year periods as established by the Board. Comparisons are also made with the income index, which steers indexation of the pension system’s obligations. In addition, the Fund’s returns and risks are compared with those of similar asset managers, both in Sweden and internationally. Furthermore, the global market index, which shows the portfolio for the average investor, is included in the comparison.

Monitoring is also carried out at a more detailed level. It is natural that this monitoring is conducted in accordance with the Fund’s investment process and divided into the three decision levels of which the process is composed – strategic allocation, strategic management and operating management. The aspects included in the three decision levels are shown in the table below . Aside from that described above, each individual mandate – both internal and external – is monitored with regard to return, risk and expenses.

Due to the long-term orientation of the Fund’s investment process, a longer period is required in order to accurately evaluate the Fund’s performance. For shorter periods such as one year, results will be reported only according to the three decision levels.

Decision level Content
Strategic allocation • Allocation between asset classes
• Size of currency exposure
• Duration of the fixed income portfolio
Strategic management • Allocation within each asset class
• Management strategies within each asset class
Operating management • Management in relation to the chosen strategies