This thesis examines if the correlations between equity sectors have increased over time, mitigating sector diversification. Investors and other financial enthusiasts have started to believe that sector diversification is not a useful investment strategy. To investigate whether correlations among the sectors are rising, this study analyzes numerous aspects regarding sector diversification. Twenty years of monthly sector returns are used to determine whether correlations among the sectors are increasing. Also, the analyzation of sector movement during up and down periods of the market is addressed within the thesis. This study finds that the majority of the sectors move together in times of a financial crisis, like the 2007-2008 market crash. Thus, when sector diversification is most needed, it often fails during times of strife. Furthermore, the study analyzes how the majority of the sectors tend to not move with the market over the twenty-year period. Results suggest the correlations between the sectors have not become closer contrary to popular belief. The importance and usefulness of sector diversification when investing is validated by this study’s results.

Over the past decade, the Swedish pension funds AP1, AP2, AP3, and AP4 have significantly increased their capital allocation towards unlisted real estate. This study explores the investment strategies of these AP funds, examining the methods used in asset class investments, risk mitigation measures, responses to macroeconomic threats, and investment returns. Employing a mixed-methods approach, the research integrates semi-structured interviews with fund representatives and statistical analysis of data from annual reports.  Findings indicate that the AP funds have capitalized on post-financial crisis real estate market dynamics, particularly evident in investments initiated in the years after the crisis. Notably, AP1, AP3, and AP4 have gained good returns through sector diversification, contrasting with AP2’s less successful geographic diversification. Investments are primarily direct or joint ventures in unlisted real estate firms, avoiding PERE-funds due to their shorter holding periods and high costs. Risk is mitigated through extended holding periods, strategic partner selection, board involvement, and analysis of megatrends. The low risk-free rate environment that has been in Sweden for the last decade has significantly supported the unrealized returns from the investments. Future capital allocation should focus on non-competing sectors, reinvestments in existing assets, and identification of new trends to enhance sector investability. / Under det senaste decenniet har de svenska pensionsfonderna AP1, AP2, AP3 och AP4 ökat sin tillgångsallokering avsevärt i onoterade fastigheter. Denna studie utforskar investeringsstrategierna för dessa AP-fonder och granskar de metoder som används i investeringarna i tillgångsklassen, vilka åtgärder som görs för riskminimering samt hur makroekonomiska hot minimeras och vilka avkastningarna investeringarna gett. Genom att använda en blandad metod använder studien semistrukturerade intervjuer med fondrepresentanter och statistisk analys av data från årsredovisningar. Resultaten visar att AP-fonderna har kapitaliserat på dynamiken på fastighetsmarknaden efter finanskrisen, särskilt tydligt i investeringar som initierades åren efter krisen. Noterbart är att AP1, AP3 och AP4 har uppnått betydande avkastningar genom sektordiversifiering, i kontrast till AP2:s mindre framgångsrika geografiska diversifiering. Investeringarna sker främst direkt eller via klubbstrukturer i onoterade fastighetsföretag, där PERE-fonder undviks på grund av deras kortare hållperioder och oproportionerliga kostnader. Riskminimering uppnås genom långa investeringshorisonter, strategiskt partnerurval, styrelseengagemang och analys av megatrender. Den låga riskfria räntemiljön som varit i Sverige det senaste decenniet har avsevärt stöttat de orealiserade avkastningarna från investeringarna. Framtida kapitalallokeringar bör fokusera på icke-konkurrerande sektorer, återinvesteringar i befintliga bolag och identifiering av nya trender för att hitta sektorer som blivit investerbara.