AP3 interim report for the six months ended 31 June 2016
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AP3 recorded a profit of SEK 4,206 million (18,483) for the first six months of 2016.
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Fund capital reached SEK 304,021 million, an increase of SEK 990 million (16,066) during the period. The Fund capital at 1 January 2016 was SEK 303,031 million.
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AP3 paid SEK 3,216 million (2,417) to the Swedish Pensions Agency during the first half of the year to cover a shortfall between incoming pension contributions and outgoing pensions.
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Total real return was 1.5% (6.5) before expenses and 1.4% (6.4) after expenses. The Inflation, Fixed Income and Currency risk categories made the largest contributions to this performance.
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AP3 has generated average annual returns of 8.3% and 5.7% over the last five and 10 years respectively. This compares to annual increases of 1.8% and 2.5% in the Swedish Income Index over these respective time frames. By outperforming the income index, which is used to keep pensions in line with inflation, AP3 has made a substantial contribution to the pension system during the periods in question.
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Annual real return – return adjusted for inflation – was 7.9% and 4.6% for the last five and 10 years respectively. Average annual real return now stands at 4.1% since inception, meaning that the Fund has surpassed its real return target of 4% per annum over time.
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The asset management cost ratio was on an annual basis 0.12% (0.12) of which operating expenses were 0.06% (0.06).
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From 1 January 2012 to 30 June 2016, AP3’s return was 0.3 percentage points lower than the LSP reference portfolio. AP3 has outperformed the LSP by 2.9 percentage points on a yearly basis since the reference portfolio was introduced in 2012.
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To be able to meet increased expectations for sustainable investment and to achieve the climate goals signed in Paris 2015 by the Swedish government, AP3 has adopted sustainability targets for 2018. These include measuring and reducing carbon footprint in the portfolio and further investments in green bonds.
Summary of AP3’s results 2016:
| Jan - June 2016 | Jan – June 2015 | Jan – Dec 2015 | |
| Fund capital at 30 June, 2016 | 304,021 | 304,398 | 303,031 |
| Income for the year | 4,206 | 18,483 | 19,643 |
| Net flows to the pension system | 3,216 | 2,417 | 4,944 |
| Fund capital at 1 January, 2016 | 303,031 | 288,332 | 288,332 |
| Asset management cost ratio – operating expenses %* | 0.06 | 0.06 | 0.06 |
| Asset management cost ratio incl. commission expenses %* | 0.12 | 0.12 | 0.12 |
| Return after expenses | 1.4 | 6.4 | 6.8 |
| Annualised return after expenses 5.0 yrs** | 8.3 | 9.3 | 8.4 |
| Annualised return after expenses 10.0 yrs** | 5.7 | 6.0 | 5.7 |
* In the interim reports, the asset management cost ratio is shown on a full-year basis
** In the interim reports, annualised return is shown as 10.0 and 5.0 years respectively
Income statement
| INCOME | |||
| SEK m | Jan - Jun 2016 | Jan – Jun 2015 | Jan-dec 2015 |
| Net interest income | 568 | 725 | 1,559 |
| Dividends received | 4,474 | 3,569 | 4,644 |
| Net income from listed shares and investments | -4 930 | 8 132 | 4,418 |
| Net income from unlisted shares and investments | 545 | 3 143 | 6,636 |
| Net income from fixed income assets | 4,025 | 158 | -189 |
| Net income from derivatives | -701 | -649 | -873 |
| Net income from currencies | 403 | 3,585 | 3,811 |
| Net commission expenses | -86 | -84 | -170 |
| Total income | 4,297 | 18,579 | 19,836 |
| Operating expenses | |||
| Staff costs | 61 | 62 | 115 |
| Other administrative expenses | 31 | 34 | 77 |
| Total operating expenses | 91 | 96 | 192 |
| Profit for the period | 4 206 | 18 483 | 19 643 |
Balance sheet
| ASSETS | |||
| SEK m | 2016-06-30 | 2015-06-30 | 2015-12-31 |
| Shares and investments | |||
| Listed | 146,985 | 144,378 | 143,642 |
| Unlisted | 4, 436 | 41,805 | 39,196 |
| Bonds and other fixed income assets | 133,246 | 139,492 | 132,373 |
| Derivatives | 4,287 | 5,455 | 5 ,460 |
| Cash and cash equivalents | 1,072 | 1,386 | 1,780 |
| Other assets | 10,533 | 21,181 | 11,569 |
| Prepaid expenses and accrued income | 1,004 | 1,203 | 1,083 |
| Total assets | 338,563 | 354,899 | 335,101 |
| FUND CAPITAL AND LIABILITIES | |||
| Liabilities | |||
| Derivatives | 6,059 | 4,237 | 3,071 |
| Other liabilities | 28,349 | 46,219 | 28,920 |
| Deferred income and accrued expenses | 133 | 46 | 79 |
| Total liabilities | 34,542 | 50,501 | 32,070 |
| Fund capital | |||
| Fund capital at start of period | 303,031 | 288,332 | 288,332 |
| Net payments to pension system | -3,216 | -2,417 | -4,944 |
| Profit for the period | 4,206 | 18,483 | 19,643 |
| Total fund capital | 304,021 | 304,398 | 303,031 |
| Total fund capital and liabilities | 338,563 | 354,899 | 335,101 |
AP3 published its sustainability engagements in the 2015 annual report and sustainability report. Both these documents can be viewed and downloaded at www.ap3.se.
For further information, please contact:
Kerstin Hessius, CEO, Third Swedish National Pension Fund, +46 8555 17 100
Lil Larås Lindgren, Head of Communikation Third Swedish National Pension Fund, +46 8 555 17 123 eller lil.lindgren@ap3.se
The Third Swedish National Pension Fund (AP3) is one of five funds that manage the Swedish state pension system’s capital buffer. The fund had total capital of SEK 304 billion as at 30 June 2016. Established when the current pension system launched in 2001, AP3 has so far contributed SEK 20 billion to help cover deficits arising within the system. AP3’s fund capital stood at SEK 134 billion at inception and the Fund has generated an annual return of 5.4% since 2001. During this period the income index, which is used to keep pensions in line with inflation, has risen by 2.8%.