The Fund pursues an efficiency strategy that focuses on efficiency in resource allocation as well as internal processes. It consistently challenges its own organization by finding relevant and objective external means of comparison in as many areas as possible, to create a culture of ‘best practice’.
For the Fund, process efficiency means concentrating on security as well as flexibility. Secure processes are not just clear and respected processes, but where the risks that exist are identified and assessed.
From the start, the Fund defined the need to build flexibility into business processes as a fundamental principle. This has enabled the rapid implementation of changes in its asset management strategy, as well as efficient switching between in-house and external management.
The Second AP Fund’s assets are invested in a range of geographic markets and a variety of asset classes, resulting in a complex portfolio. Efficient exposure of the capital as specified in the Fund’s strategic portfolio and its rebalancing when affected by major movements in the market demand special competence, given the fact that asset classes constantly interact in ways that are seldom predictable.
The Second AP Fund’s fund management costs are subjected to annual analysis by an internationally respected firm of analysts – Cost Effectiveness Measurement Inc. (CEM). CEM is a Canadian company with many years experience of analysing pension funds similar to the Second AP Fund, both in terms of character and function.
The 2008 analysis reveals that the Fund’s costs are below the average for comparable global pension funds, deriving mainly from the Fund’s decision to manage the greater part of its capital assets in-house, as well as from the relatively low level of costs noted by several of the externally managed mandates.
Collaboration between the AP funds
As part of a joint commitment to effective fund management, the First, Second, Third and Fourth AP funds collaborate closely on a number of issues. Areas of collaboration include
- joint involvement in environmental and ethical issues via the joint Ethical Council
- tax issues
- accounting and valuation issues
- joint legal issues
- a joint voting platform.