Background: In 1999 the Swedish pension system was reformed with an aim to create a stable and high return on pension assets. First, Second, Third and Fourth general pension funds, hereby referred to as AP1-AP4, had an important part in the reform. AP1-AP4, also called the buffer funds, was assigned to secure long-term, big parts of the pension capital. The funds objective is by law, to manage the fund's assets in a manner that provides maximum benefit for the state pension. The funds will also invest pension assets with an overall low level of risk while achieving a sustainable high return. Aim: The purpose of this study is to investigate whether the First-Fourth AP-Funds is meeting its objectives regarding risk and return according to Swedish law. The aim is also to see how AP1-AP4 risk-adjusted returns compare to the four Sweden funds risk-adjusted returns according to modern portfolio theory. Theory: Morningstar Rating, Treynor ratio, Sharpe ratio, Jensen's Alpha, Standard Deviation, Beta. Conclusion: The risk-adjusted performance measures used in this study shows that there are clear differences between the two fund groups, where the AP-funds performed worse than the Sweden funds in every measurement. The study shows that the pension funds do not reach their goals over the five-year period, in four of the five time intervals listed in the study. In summary, the study shows that pension funds have a lower risk-adjusted return than the four bank Sweden funds and that the pension funds have not achieved their goals.

Morningstar is an independent provider of investment research and provide information on approximately 380 000 investment offerings about mutual funds. Morningstar are most known for their “star” rating system, which rates funds from the lowest 1-star to the highest 5-stars. Since investors frequently use fund data provided by Morningstar, we will evaluate whether investing in funds with higher fees and higher ratings would end up with higher returns. Examinations will be made if there is a relationship between mutual fund performance and the management fees within top-rated (5-star) funds and bottom-rated (1-&2-star). The mutual funds which are included in this thesis are United Kingdom (UK) managed and invested in three different markets; Asia-Pacific except-Japan, Europe except UK-Large Cap, and the United States (US) Market. This allows us to compare different markets at different stages of maturity. The results clearly show that the top-rated funds within all three markets outperformed the bottom-rated funds. Furthermore, the results demonstrate that the investor in general will earn a higher return by paying a higher management fee (TER) for the top-rated funds in all regions. The results also show that the TER for the bottom-rated funds in Europe and US market is higher compared to the top-rated funds. This means that the investor will pay higher fees for funds that do not perform well.