The head of AP2 has branded the proposed restructuring of Sweden’s buffer fund expensive and risky, questioning whether the reform will produce the desired outcome.
Eva Halvarsson, managing director of the SEK306.5bn (€Xbn) fund, expressed surprise at a number of reform proposals announced by the government earlier this summer, when it confirmed the long-expected closure of AP6 and a second, yet-undecided buffer fund.
Writing in the fund’s half yearly report, which saw AP2 return 5.2%, Halvarsson said she welcomed the admission that investment regulations should be relaxed and that at least one of the three remaining funds would be based in Gothenburg, but took issue with other elements of the proposal.
“What worries me, however, is the proposed formation of a new AP Fund committee, raising the increased risk of political control over investment activities that this implies.
“Fundamental to the proposal to reform the system of AP funds, tabled at the start of the new millennium, was the principle that responsibility for the management of this buffer fund capital was to be strictly separated from the government,” she added.
The managing director noted that the proposed National Pension Fund Board, would introduce “considerable risk” that management of the remaining three funds would be subject to political control, as government could decide matters of administration, while the board could set overall cost ceilings for asset management.
Halvarsson is not the only AP fund head to come out against the reforms.
Mats Andersson, managing director of AP4, previously warned the reforms could “destroy” the buffer fund system, and echoed concerns about political interference.
The chair of the 2012 Buffer Fund Inquiry, Mats Langfensjö, also criticised the proposals, telling IPE they removed the system’s “strongest competitive advantage” as long-term investors and risked seeing the funds becoming index trackers.
Halvarsson nonetheless said that she would spend “considerable effort” in responding to the government’s proposals.
But she added: “Given the considerable professional competence and expertise possessed by the Second AP Fund, I am already sceptical as to whether the extensive, costly and risky changes proposed are really necessary to creating the best possible conditions for the future development of the national pension system.