Sweden’s Fund Selection Agency (Fondtorgsnämnden, FTN) awarded its largest batch of premium pension contracts to date this morning, awarding SEK157bn (€14.1bn) of Swedish active and passive equities mandates to 10 managers – more than halving the number of funds currently on offer in the key category.
Erik Fransson, executive director of the agency tasked with repopulating the funds platform of the first-pillar, defined contribution (DC) pension system, told IPE: “We’re happy to be able to announce a good outcome, and a good outcome means we have improved quality in the universe, Swedish equity funds, active and passive.”
The good quality, alongside lower pricing, created a better opportunity for Swedish premium pension savers to achieve higher returns on their savings on the platform, he said, adding: “And if they achieve higher returns, at the end of the day, it’s higher pensions”.
The tender results announced today comprise two procurements, the sixth and seventh processes that the FTN has carried out since it started the work three years ago.
In the sixth tender, for actively-managed Swedish equity funds with a focus on large and mid-cap companies, 10 funds were procured, which are run by seven fund managers, in a category in which SEK92bn is currently invested.
The award decision means those savings will be allocated to the new list of funds, which is shorter than the list of 22 funds on offer in the category up to now.
In the seventh tender – for passively-managed Swedish mid and large-cap equity funds – five funds have been picked to take over the SEK65bn of savings currently invested in the category, across 11 funds.
Those five new funds are managed by just three fund management firms, with Handelsbanken Fonder emerging as a big winner of the mandates with three funds – with a focus on large and mid-cap companies.
Fransson said: “It is easy to assume that all index funds are identical, but the differences are more significant than one might think at first glance, and the funds procured have demonstrated that they possess the expertise and processes necessary to provide value to investors.”
In the active Swedish equities procurement, three of the successful managers each won mandates for two funds – Carnegie Fonder, SEB Funds and Swedbank Robur Fonder, while AMF Fonder, Cliens Kapitalförvaltning, Handelsbanken Fonder and Simplicity each won mandates for one fund to be listed on the platform.
Fransson said the agency expects to award mandates in the SEK200bn procurement for actively managed global equity funds in the autumn.
Once that procurement and the following procurement for actively managed global technology funds – a segment which has attracted SEK124bn of premium pension savings – are completed, the executive director said the agency will have procured new fund offerings for 90% of the volume of equities on the premium pension system.
With the agency’s work now roughly at the halfway stage, Fransson said he was satisfied with the way things had gone so far.
“We’ve said from the start that we had to make sure we’re good – because it’s a lot of money, a lot of members and we can’t really afford not to do a good job. It’s too expensive for everyone,” he noted.
“Our success also depends on being respected in the market, by fund companies, asset managers, and even when one is not successful in a search, we try to make sure they understand why they’re not being selected,” he added.
“We have to do it well, and of course we have learnt a lot since the first search,” he said.
Regarding today’s awards, Fransson said: “At least we can see from tender quality that it was 100% this time – there were no tenders we had to disqualify due to some companies missing out on mandatory requirements, not filling out things they should have.
“There are some fund companies for whom it is maybe their second or third they’re participating in, and they’ve learned as well,” Fransson said.
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