Swedish buffer funds could shift to prudent person principle – AP4

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AP4 has backed a shift to a prudent person principle, despite the Swedish government’s decision to cancel the proposed reform of the buffer fund system.

The government dropped plans to close two of the buffer funds last week after it became apparent the cross-party Penisonsgruppen, tasked with agreeing pension reform, could not reach an agreement. 

Mats Andersson, managing director at AP4, predicted it would be “some time” before any new reform proposals are tabled.

“We’ve been under investigation for three-and-a-half years,” he told IPE, referencing the start of the initial Buffer Fund Inquiry chaired by Mats Langensjö. “We can’t continue to function under these circumstances.”

Andersson said the proposal discussed by Pensionsgruppen would have made life for the buffer fund system “so much worse”.

But he did qualify his condemnation of the proposals, which included an overhaul of sustainable investment guidelines and a shift to a prudent person model under a principal sitting within a proposed National Pension Fund Board.

“I would love to see other regulation in terms of how much we can invest in unlisted [assets],” he said.

AP6, the private equity fund set to be merged with AP2 under the proposals, has argued that the creation of a so-called excellence centre for unlisted assets would be the best solution for the system, despite the decision to abandon the reform.

The proposal was for the remaining three AP funds to pool unlisted investments, potentially with a joint investment committee overseeing the vehicle’s activities.

For his part, Andersson was also in favour of a shift away from binding investment regulation to a prudent person principle, one of the main proposals contained within the Buffer Fund Inquiry’s report

“You can implement the prudent person into the system we have today,” he said. “That’s the only part I really miss.”

He added: “But given the alternatives, [abandoning the proposals is] the best we could hope for.”

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