AP1, Sweden’s buffer fund, said it was now preparing to make its first investments in infrastructure as part of a shift in its long-term investment strategy.

Releasing its annual report for 2014, the pension fund said it was continuing to develop its long-term strategy, through its focus on unlisted, illiquid assets such as private equity funds and infrastructure.

Johan Magnusson, chief executive of AP1, said: “Our investments in private equity funds have proven successful, and the organisation is now getting set for investments in different types of infrastructure.”

Last September, Magnusson said the fund had taken a decision to increase investment risk as part of its strategic approach to create a portfolio that was robust to major changes in value.

Unlike several other of the AP funds, AP1 has to date largely limited investments to the traditional asset classes of real estate, equity and fixed income, with small stakes in private equity and hedge funds. In comparison.

The pension fund generated an investment return after expenses of 14.6% last year, up from 11.3% in 2013, which compared favourably to the returns of fellow buffer fund AP3, which saw returns of 13.7% after expenses.

In absolute terms, AP1’s net investment income after expenses was SEK36.4bn (€3.8bn) compared with SEK25.7bn the year before.

Net assets rose by SEK31bn to SEK284bn – behind both AP2, at SEK293.9bn, and AP3, with assets of SEK288.3bn.

Magnusson said all asset classes had given a “healthy” return.

Administrative expenses rose to 0.17% last year from 0.14% the year before.

The fund paid a net SEK5.1bn to the Swedish pension system in 2014, down from SEK6.9bn, according to the published data.

AP3 chief executive Kerstin Hessius praised the support the AP funds were able to offer Sweden’s pension system, having paid out SEK100bn across the four funds.

”At the same time, the AP funds have made a growing contribution to the pension system’s long-term financing. Our combined fund capital now exceeds 13% of total pension system assets, compared to 10% at inception.”

AP1’s exposure to both equities and bonds decreased over the year, while the amount of assets in hedge funds and private equity funds increased, figures showed.

Shares dipped to 48.9% of total assets from 49.2%, and fixed income securities fell to 30.9% from 31.2%.

Meanwhile hedge fund exposure rose to 5.9% from 4.9%, and private equities accounted for 4.4% of overall assets at the end of the year after taking up 3.3% a year before.

The property allocation remained unchanged year-on-year at 8.8%.