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Impact Investing

IPE special report May 2018

Sections

Sweden to close AP6 buffer fund, consolidate unlisted assets into AP2

Sweden is to close AP6 and a second, as yet undecided, buffer fund in an overhaul of the AP fund system that will also see a greater emphasis placed on sustainability.

In a move meant to save costs, the government also announced that all of the system’s holdings in unlisted assets were to be pooled and overseen by AP2, which is to absorb AP6.

The proposals, published by the Ministry of Finance nearly three years after the conclusion of a review chaired by Mats Langensjö, will also see the strengthening of responsible ownership at the Swedish buffer funds.

The suggestion is in line with previous calls from deputy finance minister Per Bolund that the country set a more ambitious agenda for sustainable investment.

Bolund, a Green MP within the left-leaning coalition government, said it was “encouraging” that there was now a broad political consensus around the restructuring of the system – which currently comprises AP1-4 and AP6 – following discussion of the proposals among the six political parties that comprise Pensionsgruppen.

In line with the previous report by Langensjö, the government confirmed the end of the current quantitative investment guidelines and a shift to a prudent person principle.

A new Pension Reserve Board will also be granted ownership of the assets.

AP6, based in Gothenburg alongside AP2, and one of the three AP funds based in Stockholm will be closed.

A decision on which fund that is will be reached at a later date.

While the inquiry headed by Langensjö came out in favour of a single buffer fund, the government at the time preferred the retention of at least three funds. 

The system will be renamed to ensure the remaining funds are named AP1-3.

The closure of AP6 will see what is currently AP2 take on responsibility for all of the buffer fund’s unlisted assets, and the funds asked to cooperate through a joint investment committee representing the interests of all three remaining funds.

Erik Thedéen, at the time state secretary in the Ministry of Finance, told IPE last year that property holdings could be consolidated into a single fund, or that they could launch a single vehicle responsible for unlisted assets.

The 400-page consultation document said the government would only regulate how AP2 proceeded if it and the other buffer funds were unable to collaborate.

The arrangement would be subject to annual review, likely through the annual AP fund report tabled in Parliament.

It added that, unlike a number of large Canadian pension funds, the AP funds should not strive to be sole owners of assets and instead pursue joint ventures, as the concentration of risk would not be an “appropriate” use of buffer fund capital. 

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