State Street Global Advisors has emerged victorious in the battle to pick up the brief for the foreign equities portfolio of Sweden’s 7th AP-fonden – a mandate that could potentially run to around SEK15bn (e1.8bn) in assets.
The 7th AP-fonden – the default fund for non selectors within the country’s new PPM system, had decided to consolidate its overseas equities with a single manager. In a run-off between seven large international investment managers, State Street emerged winners due to a combination of global reach and serviceability, according to Peter Norman, executive president of the 7th AP-fonden: “ We are delighted to be working with SSGA. We were keen to make sure that we had experienced managers with world-wide expertise, but also of a size that would allow us to manage the fund while keeping costs down.”
Swedish managers, however, were conspicuously absent from the shortlist to manage the funds assets.
The mandate consists of a complete outsourcing of the fund’s assets for the first three months – amounting to SEK20bn while the 7th fund tests its systems. Subsequently, SSGA will retain the global equity portfolio worth around SEK10-14bn.
Initial asset allocation for the fund will be 85% equities, of which 20% will be Swedish and 15% fixed-income. The benchmark has still to be selected by the 7thAP-fonden while it considers its optimal risk/return ratio.
From the starting long-list of 13 managers, SSGA was only one of seven managers, which could comply with the reporting demands of the seventh fund.
Non selectors of private funds in Sweden under the PPM system – launched last month - will have their 2.5% transferred to the seventh fund.
Sweden’s RSV Internal Revenue Service estimates that one in three Swedes will not make a personal fund selection for the PPM system - giving an amount of SEK15-20bn.
SSGA has also been named as adviser for the equity portion of the Premium Choice Fund (PCF) – a more aggressive fund for individual savers seeking enhanced returns.
Jean-François Schock, managing director of SSGA Brussels and European head of sales and marketing, adds: “ By teaming up with AP-7 we are in a position to play a key role in the investment of the Swedish premium pensions. The mandate means we will be responsible for investing millions of Swedish citizens – a challenge we relish.”