Targets and benchmarks for the organization
TARGETS: Six Nordic 200 Cap GI (Listed) + risk premium of 2.5 percent
The established targets for the organization are comprised of “SIX Nordic 200 Cap GI”, which is a Nordic index that includes the 200 largest listed companies. A risk premium of 2.5 percent is added to that. It covers the risk associated with the non-liquid asset class, unlisted companies. The target is used to evaluate the organization’s return over longer periods of time. This type of comparison provides an indication of the return that could have been generated for the pension system if capital had instead been invested in that index, rather than being managed in accordance with the mandate stated in the Sixth Swedish National Pension (AP) Fund Act (2000:193).
Return analysis supplemented by unlisted benchmark – To make a fair comparison, a long time horizon is required (across multiple business cycles)
How does the return generated by AP6 compare to that of others in the private equity market? To answer that, the return analysis is supplemented with an unlisted benchmark. This benchmark (Burgiss Europe All) shows what a median fund in the private equity market, with an investment focus on Europe, generated as a return during various periods of time. Unlike the listed market, there are natural reasons for delaying the release of information from the unlisted market. The primary one is associated with the valuation efforts that must be applied to the funds. After that, there is comprehensive registration work that must be done by the supplier of return data. All return figures consist of the correct number of years and periods, yet with an approximate delay of one quarter. As with the listed target, this reference point must be used for comparisons applied to the long term, covering multiple business cycles.
Unlike a traditional PE fund, AP6 may neither claim nor distribute capital once the fund has been closed. To manage this difference, there needs to be a liquidity buffer of approximately 10 percent for short-term liquidity fluctuations.
Index + liquidity
To make a fair comparison, the benchmark selected by AP6 is based 90 percent on Burgiss Europe All and 10 percent on OMRX T-Bill, which is the target for liquidity management.