Annual Report 2021

Excess return

We want to achieve even better results for our clients over the longer term because we are an active investor. In other words: returns above the benchmark. We will call this an excess return or “outperformance” should we manage to achieve it. We often use a market index that expresses the average return in the market. We use various strategies to outperform the market. Our investment decisions are based on human judgment, analytical models which are data-driven, and macroeconomic and company-specific analyses. This can lead to clear choices within certain investment categories, or it may be diversified across various investment categories. This combination of various approaches provides a solid starting point for achieving a higher-than-average return over the long term.

We have achieved an average excess return of 54 basis points (0.54%) over the previous five years, which is measured across all investments managed for our pension fund clients. Our additional return in 2021 was 105 basis points. This is above average. The positive result is partly due to diversification: a negative additional return in liquid investments was compensated for by non-liquid investments and a tactical allocation of assets. All three asset categories will outperform the market over a period of time. 

Liquid investments

Liquid investments had a negative return in 2021 after costs and have had a marginally positive return over the last five years. Investments in credits achieved a significant outperformance, and the benchmark was also set in 2021 in emerging market debt. Active equity strategies returned an overall negative performance. Quantitative strategies, which had been lagging behind until last year, were on the road to recovery. Fundamental analysis-driven strategies, however, were falling behind. This was partly due to stock selection carrying less weight than the large, expensive tech stocks. Fundamental strategies move around their outperformance goal and are measured over a five-year period.

Non-liquid investments

An excess return of 131 basis points was achieved in non-liquid investments. The figures over a longer period, over five years for example, are more representative because there are always some measurement discrepancies associated with the difference in the period of time between portfolio and benchmark information in a number of non-liquid investments. The result for that measurement period is also positive, with a total of 39 basis points. An important contribution over both 2021 and the past five years was made by investments in private equity, where good results were achieved partly due to a number of favorable “exits”. The infrastructure portfolio, which is smaller in size than private equity, also outperformed strongly over both time periods. A small excess return was achieved over the past five years in real estate due to good results in 2021. Hedge funds results, which are subject to fewer measurement discrepancies than most other non-liquid asset categories, were massively improved in 2021 due to a large outperformance. Commodities maintained a solid five-year track record even after returning negative figures in 2021.

Tactical asset allocation

Tactical asset allocation has focused over the past year on considering asset categories that are sensitive to improving growth potential and an increasing preferred risk element of financial markets. The first plays a role because the world is recovering from the COVID-19 pandemic. The second is due to interest rates, which remain low and are forcing a number of investors to achieve part of their required return by taking risks. This provided excess returns in most months. This is because active positions, due to limited controllability, were often much smaller than in 2020 and market volatility was lower, which meant that the result achieved for this strategy was not as high as it was in 2021.