Applying Treynor-Black Model with AP7 Såfa in the Swedish Premium Pension System : To choose between active and passive portfolio management

Sammanfattning: Background: Since 1998 Sweden has individual accounts as a part of both public and occupational schemes (Sundén 2006). Yearly, 2,5% of the pensionable income is set aside to the premium pension (The Swedish Pension Agency 2021) Individuals are able to choose how the premiums should be paid in the system and in what way the money should be invested, either by choosing from the fund market or by refraining from making an active choice and instead let the Swedish pension agency management their money in the passive alternative called AP7 Såfa. The passive alternative AP7 Såfa is a portfolio which adapts to the age of the investor and is built to fit a long-term pension investment.  Purpose: This study will focus on evaluating if the passive alternative AP7 Såfa has an excess risk-adjusted return compared to given portfolios in the premium pension selection system, or if the investor would benefit from managing the portfolio more actively. The study will also search for benefits using the Treynor-Black model to check the optimal allocation between this actively managed portfolio versus the passive alternative AP7 Såfa.  Conclusion: This thesis has shown that there might be superior strategies rather than the index fund to find risk-adjusted excess return in the premium pension system. However, those strategies require professional analysts in order to forecast securities. For households choosing between active management themselves or the passive index fund AP7 Såfa, the most beneficial investment is to be passive and to not actively manage the portfolio. The optimum strategy is found to be the Treynor-Black model with a combined portfolio of the index fund and the active portfolio.