The new Swedish government agency set up this summer to procure investment funds for the revamped €100bn premium pension platform has given more detail about how and when its tendering process will happen, saying the European and global equities will be among the first asset categories it will find managers for.
At an event for fund managers on Friday, the Swedish Fund Selection Agency (Fondtorgsnämnden) gave a status update, telling would-be participants on its platform how its work to devise the procurement process was going – and disclosed the fee model.
The body said its mandate was to procure, monitor and quality-ensure the funds in the first-pillar, defined contribution Swedish premium pension system, with the aim of providing funds of high quality that provided a safer and higher pension for savers.
“The new legislation means higher requirements on both funds and fund managers when taking part in the procurement process,” it said in the update.
Reliability would be of utmost importance, it said, adding that by focusing on high-quality investment processes, both reliability and investment results would be improved.
“A strengthened monitoring process will also enable the quality to be maintained over time,” the agency said.
The Fund Selection Agency has been created to reform the premium pension system, which was launched in the late 1990s and hit by numerous scandals involving mis-selling and fraud on the original funds marketplace platform which included all comers meeting certain criteria.
The agency said there were currently around €200bn in the premium pension system, and with inflows larger than outflows it was expected to double in size by 2040. However around half of premium pension savings are managed by the default provider AP7, leaving some €100bn invested in privately managed funds on the system’s funds platform.
The transition to the new fund platform is to be done gradually, according to the new agency, with existing fund agreements being replaced by new ones as the newly-selected funds become available.
The plan is for searches and procurements to begin in the spring 2023 with around 30 procurements taking place until the middle of 2025.
“It is an ambitious pace, but the focus will always remain on quality, which is prioritised over the time plan, the agency said.
The first categories to be procured are European equity, active and index; global equities index; Nordic equities, active and global fixed income – though not necessarily in that order, according to the agency.
It described its assignment as having five “dimensions” – suitability, quality, cost, sustainability, and controllability – and said the procurement process it had created was divided into phases, with extensive evaluation and monitoring being done before, during and after the procurement.
The RFP would be extensive and detailed, the agency said, and material submitted via e-Avrop, starting a qualification process. Managers then passing that stage would enter an evaluation phase, it said, involving extensive qualitative and quantitative analysis.
At that stage, the agency said it would the focus would include four areas – investment philosophy, process, resources and results.
Sustainability would be evaluated on two levels – the minimum requirements, and specific sustainability requirements, it said.
“The individual saver has then the final decision to choose between funds of different sustainability levels, however with a high base level on the platform,” the agency said.
The interview phase will consist of a meeting on site at the fund manager’s office, according to the Fund Selection Agency.
The fee-model – which has yet to pass the Swedish legislative process – involves a fee for participating in procurements of an estimated SEK18,000 and an annual fee for funds on the platform of either 0.5 basis points for passive funds or 1.5 basis points for actively-managed funds.
The government agency said it was to be financed outside the state budget, in order to secure long-term targets and independence.
Initial work to build the organisation – which consists of a board and its office – had been successful, the agency said, with staff having been hired for all key roles.
The office is divided into three units – procurement and product strategy; investment due diligence and operational due diligence, and monitoring – led by Majdi Chammas, Tina Rönnholm and Magnus Strömer respectively, with four “cross-functional” teams working across all three units.
Meanwhile, the board will be making all larger strategic decisions, the agency said, such as on the business plan, the procurement plan, the procurement design, start of procurement, award decisions and steering documents.
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