SWEDEN - Första AP-Fonden (First Swedish National Pension Fund AP1) has announced it is looking to appoint investment managers as part of its new international real estate strategy.
The Swedish pension fund, which had SEK 201.8bn (€19.1bn) in assets at the end of June 2008, has issued mandates for investment managers to manage global listed property securities accounts and North American listed Real Estate Investment Trust (REIT) accounts.
Rikard Kjorling, head of external management at AP1, said the plan is to temporarily find external global property securities managers and later relocate this mandate to North American listed REIT managers within one to three years.
"It is part of our investment strategy. We have invested within Swedish real estate markets and we are looking to invest abroad."
The total value of assets to be invested is $200-300m (€151-227m), and the pension fund will then start investing from mid-2009.
Explaining AP1's decision to invest in REITs, Kjorling said: "We think it is a good diversification, overall, for our property portfolio. Also because of tax, it is one of the few ways to enter the United States' real estate market."
At the time of the last annual report, AP1 had allocated 3-4% of its assets to real estate, according to Kjorling, all of which was invested in Sweden's domestic property market.
More importantly, the financial crisis has had little effect on the pension fund's real estate investment plans, said Kjorling.
"When it comes to our real estate portfolio, it (financial crisis) has not changed our strategy," he said.
AP1 had net asset values of SEK 201.8bn (€19.1bn) at the end of June, down from SEK 218.8bn (€20.7bn) at the end of 2007, and allocated 61% to equities, 37% to the fixed income market and 3% to alternative investments.
Alternative investments were primarily made up of securities in unlisted real estate companies and participations in equity funds, and had a total portfolio value of SEK 6.5m (€614,611). They returned 1.6% for the first half of 2008, while the pension fund's total return was -8.0%.
AP1 is looking to apply two types of mandates with different funding strategies, and has stated a preference for separate accounts, though commingled vehicles might be considered.
The deadline for investment managing companies submit tenders is 26 January 2009. and AP1 will then reach a decision about who to appoint as managers by the spring in 2009, said Kjorling.
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