AP2’s strategic allocation is determined annually by the Fund’s Board of Directors and constitutes the main decision for the long-term achievement of targets in the pension system. The strategic allocation specifies how, over a period of 30 years, fund capital should normally be distributed over a number of main asset classes and to what extent the fund capital should be exposed to currency risk.

The choice of strategic allocation is based on an analysis of the future development of the pension system. To analyse the dynamics of the income pension system, AP2 has an internally developed so-called ALM (Asset and Liability Management) model. The ALM model simulates the annual development of the pension system over the chosen analysis horizon, i.e. 30 years. Based on the simulations, it is possible to identify the portfolio composition that best meets the target, i.e. the one that minimizes the expected future pension loss due to automatic balancing.