Sweden’s third national pensions buffer fund AP3 has criticised the government’s decision to whittle down the buffer fund system to just three funds, citing its own returns record.

Releasing financial figures for the first half of this year, AP3’s chief executive Kerstin Hessius said: “Our asset management strategy has worked well, resulting in high returns and low costs compared with similar pension funds at international level and a doubling of fund capital since inception in 2001.”

She added: “We have made a strong contribution to the financing of the pension system by generating returns that have grown faster than the income index.”

The income index is a Swedish indicator used to keep pensions in line with inflation. 

Since 2009, four of the national buffer funds – AP1, AP2, AP3 and AP4 – had paid out nearly SEK90bn (€9.8bn) to close the gap between contributions and payments in the mandatory pay-as-you-go pension system, she said.

“Seen against that background, we find it difficult to understand that the Pensions Group has proposed such wide-ranging changes to the current system of AP funds,” Hessius said.

She acknowledged that the system did need to be reviewed from time to time.

“But we are concerned the recommendations will have a negative impact on both current and future pensions,” she said.

In March this year, the cross-party Pension Group decided to accept many of the recommendations from the 2012 inquiry into the buffer fund system chaired by Mats Langensjö, and close two of the five funds concerned – AP1 to AP4 and AP6.

The overhaul encompasses the investment strategy and governance structures of the funds.

A further review is being carried out to help decide which two funds will be wound up.

AP3 said in its interim report that it had generated an average annual return of 8.2% over the last five years, measured at the end of June – compared with 8.5% at the same point last year – and 6.4%, compared with 6%, over the last 10 years. 

This, said AP3, compared with annual increases of 1.6% and 2.5% in the income index over these periods.

In the January-to-June period, AP3’s profit rose to SEK16.57bn from SEK12.46bn, or 6.5% after expenses, up from 5.4% in the same period last year, the pension fund said.

Fund capital climbed to SEK14.1bn between January and June to SEK272.58bn, it said, with SEK2.47bn having been transferred to the Swedish Pensions Agency during the period.

AP3 said it cut its equity exposure in the first six months of the year to 49% from 52.6%, reallocating funds mainly to fixed income as well as to property, infrastructure and risk premium strategies.

It said it was continuing to diversify the portfolio to make it more robust.

Fixed income exposure rose 8.6 percentage points to 22.7% in the first half, reflecting “a cautious investment approach in the light of asset valuations, risk appetite and our assessment of macroeconomic conditions”.