Wednesday, 16 April 2014

Swedish pension fund eyes a more activist stance

Swedish pension fund eyes a more activist stance

“I strongly believe if you can be an active long term owner you can enhance your returns”, chief executive Mats Andersson told Financial News. “I think it is a matter of engaging with companies if you want to make a difference, and having a dialogue and not a fight with a company”.

AP4 is one of five so-called “buffer funds” in the Swedish national pension system, which manage and invest capital so they can provide top-ups when the system's outgoings exceed contributions from Swedish taxpayers. It has fund capital of Skr 260 billion ($39.56 billion) as of the end of 2013, making it the second-largest of these funds.

Last week AP4, a shareholder in Scania, declined Volkswagen’s offer of Skr200 per share, saying not only that the offer was too low, but also that it would prefer to see Scania remain an independent firm.
Andersson said that AP4 will take a similarly interventionist line, where warranted, in future decisions. “It is part of the evolution of managing a pension fund, you need to be more engaged,” he said.

Also last week, AP4 announced that it had invested £40.9 million into activist fund manager Governance for Owners’ Japan Engagement Fund in the first quarter, doubling the initial seed investment it made when the fund was launched in March 2012.

The fund has existing investments in engagement funds in Japan, Sweden and Europe, and Andersson said it is looking into similar investments elsewhere, particularly in the US. “If there are others I would be more than happy to look into them”, he said.

Hunting returns is of increasing importance to country's pension system, where net flows have been negative since 2009, as the “baby boomer” generation retires. The Swedish Pensions Agency expects net outflows to continue year-on-year until the mid-2040s, meaning the buffer funds will be increasingly relied on to top up the national pension system.

AP4 has a strong focus on equities, with 34% of the fund invested in global equities at the end of last year, plus 12% invested in Swedish equities. This helped drive returns of 16.5% in 2013.
It has made a similarly strong start to 2014, said Andersson, with its weighting towards equities “more or less” the same.

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