The appointment of a trustee in charge of Sweden’s SEK1trn (€113bn) AP Fund system will allow for a more flexible and dynamic investment strategy, according to the chairman of 2012’s Buffer Fund Inquiry.
Mats Langensjö said it was a “major and important step” for a report by the cross-party Pension Group – which this week welcomed most of the Inquiry’s recommendations on the future of AP1 through AP, as well as AP6 – to accept the need to end the current arrangement that saw the buffer funds as both asset owners and managers.
He said that the appointment of a principal in charge of all AP fund assets would allow for a much more flexible and dynamic investment structure than currently permitted by the investment rules laid down in law.
“You can allocate more broadly to different asset classes, and allow the system to be more useful for the financing of the pensions,” he told IPE.
Discussing the role of the principal, he said: “I think the most important thing is to express – and finally have someone to express – an objective for the entire system, which was not in place before.”
However, Langensjö was less certain if the Pension Group should push ahead with its plans for a reference portfolio as a benchmarking tool, and warned that wrongly implemented, the proposal could again impose restrictions.
“I would say that using a reference portfolio is an old-fashioned way of benchmarking – a more dynamic risk mandate is much more appropriate.”
He said the issue would be down to the detail of the implementation, “so hopefully that’s going to be implemented in a modern and relevant way”.
Langensjö, who until last year was the chief executive of Brummer Life, also argued that future buffer funds should not be seen as in direct competition with each other.
“That’s an unnecessary peer group approach that should have been abolished many years ago, because it doesn’t have any use to the system,” he said, stressing that the need for the principal to look at the system, and its performance, in its entirety.