The proposed reform of Sweden’s buffer fund system would make it “difficult if not impossible” for the AP funds to invest in a long-term fashion, AP4 has warned.

In its response to the government consultation that proposed the closure of two AP funds, AP4 said the annual evaluation of performance – coupled with reliance on a reference portfolio – would increase “uniformity and short-sightedness” in the investment of the buffer funds’ SEK1.2trn (€126bn) in assets.

Mats Andersson, managing director at AP4, said it was regrettable that the proposal put forward would be so “obviously” to the detriment of the AP funds’ “final clients” – Sweden’s population.

“The proposal,” it added, “has almost no relevant impact assessment of the comprehensive proposals presented.”

AP4 noted that evaluation by external consultants had put the cost of the plans – which would see private equity fund AP6 merged with AP2 and a second, as-yet undecided buffer fund closed – at SEK3bn-6bn, well ahead of the estimated SEK60m in savings that would be achieved with the overhaul.

AP4 also questioned the establishment of the National Pension Fund Board, which, it argued, will make it harder for the buffer funds to invest for the long term.

Eva Halvarsson, Andersson’s counterpart at AP2, echoed AP4’s concerns, stressing that the buffer fund’s current configuration had proven a “well-functioning, cost-efficient operation” since inception 15 years ago.

“To develop this further, I welcome the proposal to open up investment rules and to introduce a so-called prudent-person principle,” she added.

Halvarsson warned against a “large, expensive and risky” reorganisation of the funds, however. 

AP3 was similarly adamant that a number of proposed changes should not proceed, rejecting out of hand any legislative underpinning for cooperation across unlisted assets – which, it has been suggested, would be consolidated into AP2 and overseen by a joint investment committee.

It dismissed the idea that the Swedish national audit office should be responsible for each fund’s annual audit, and was critical of the proposal to establish a National Pension Fund Board.

It also argued that it would be “negligent” to approve any of the reforms before the results of a full impact assessment were known.

The four main buffer funds recently wrote an opinion piece for a Swedish newspaper, warning that the reform put the buffer fund system at risk of “political micromanagement”.

Riksbank, the country’s central bank, also questioned whether the proposals would allow the funds to remain as long-term investors.