Financial operations of Riksbankens Jubileumsfond (RJ)

In advance of the 300th anniversary of the Swedish Central Bank, in 1968, the Swedish parliament resolved to allocate funds to a foundation to promote ”an important national objective”. Stiftelsen Riksbankens Jubileumsfond (RJ) was founded to support Swedish research and, according to the statues, devote itself to “research areas of which financial needs are not so well supported in other ways”. The statues have been interpreted as meaning that RJ is primarily to provide funding for the humanities and social sciences.

The Swedish Central Bank transferred funds to RJ on several occasions. The Jubilee donation of 1962 amounted to SEK 250 million. Additional funds were allocated in 1988 for the total capital to amount to 1.5 billion, an estimate of the real capital equivalent of the original donation. Later on, the foundation received an additional donation of SEK 1.5 billion (the Cultural Donation) in connection with the capital distribution of the Wage-Earner Funds as they were dissolved in 1992.

In 1988 RJ became an independent financial investor and implemented an investment process with active financial management of its capital. The foundation’s capital is managed internally by the Finance department with the exception of real estate and hedge fund investments. An investment policy is decided upon in consultation with the foundation’s Finance Committee. The policy sets the framework for the management of the capital. The policy is approved by the Board of Trustees.

The investment universe includes Swedish equities, international equities, Swedish interest-bearing instruments, directly owned real estate, real estate funds and alternative investments (e.g. hedge funds). Asset allocation and the allocation between markets is an important part of the investment process. The allocation has varied over time according to the Finance department’s assessment of the future development in prevailing market conditions.

Figur 1: Asset allocation 1989-2009
 

Over the years the investment objective has changed. 1989 to 1996, the overall goal was to maintain the capital value in real terms. In 1997 the investment objective changed for RJ’s investment team to attain a real return of 5 percent per year over time. Since 2003, the Board of Trustees has established a goal of an average real return of 4 percent per annum over time. By means of this goal RJ should be able to maintain a consistent level of research funding and thereby establish the pre-conditions to actively promote and support academic research over the long-term. Since the implementation of active management of the fund, the goals have been attained for every period; the average real return outperforms the investment objective.

In addition to the overall investment objective in terms of real return, the Finance department is also evaluated by using a reference portfolio as benchmark. The reference portfolio should be seen as an appropriate portfolio composition with which to achieve the real return objective. 2003 to 2009, the annual return of the benchmark portfolio exceeds the long-term investment objective. Moreover, the investment team has provided a return that exceeds the reference portfolio, which is attributable to asset allocation and above index return for Swedish equities, international equities and fixed income investments.

The active management of the foundation’s capital has enabled RJ to develop its activities to support Swedish research.  Research funding from RJ as an independent financial investor was first granted in 1989, since then funding totalling roughly SEK 5 billion has been distributed.

Figur 2: Approved research grants 1989-2009 (MSEK)

For a more extensive account of RJ’s financial management and its results, please consult the annual reports here.