Andra AP-fonden’s asset management is devoted to sustainability and is geared to the needs of the pension system. The Fund achieves the expected return required primarily by exposing the fund’s capital to various market risks.

The Fund’s investment strategy can be summarised as investing fund capital in an efficient portfolio that integrates sustainability and promotes sustainable development, based on an assessment of the needs of the pension system. The analysis of what the needs look like and which portfolio best meets them is done using a ALM model.

An efficient portfolio is a portfolio that provides the highest possible expected return for a given level of risk. The returns on like types of assets are not perfectly correlated. For example, this could mean, to take an extreme case, that the yield on bonds can tend to be negative when the return on stocks is positive and vice versa.

The total risk in a portfolio can therefore be reduced through diversification, i.e. spreading the Fund’s capital over several different assets and asset classes. Thus, assessments of future expected return and risk, as well as the mutual correlation between the asset classes, are important input values in the ALM model for identifying the long-term, strategic portfolio that will be most beneficial to the pension system.
Based on the overall objectives set out in the Act, AP2 has formulated a more precise mission statement for the Fund’s long-term investment strategy, which reads: The objective of the Fund’s operations is to minimise the consequences of automatic balancing over a 30-year horizon by conducting exemplary management of its assets.

The Fund’s Board of Directors formulates an overall target mandate, supplemented by a Risk and Sustainability Policy, in the form of a strategic allocation. In the next step, this allocation will be concretized by the fund in an implementable long-term operational portfolio.