Sweden’s national pensions buffer funds have reacted calmly to the news of their biggest reform in 25 years, which will mean major upheaval for the funds in the government’s pursuit of a leaner system.
On Friday, the Finance Ministry announced the cross-party pensions group had decided to go ahead with ideas put forward by government special investigator Tord Gransbo last June including merging the Gothenburg-based private equity specialist fund AP6 into AP2, the larger buffer fund in the city.
Regarding the three Stockholm-based funds, the pensions group supported liquidating AP1 and transferring its assets equally to AP3 and AP4.
Kristin Magnusson Bernard, chief executive officer of the SEK476bn (€41.4bn) fund AP1, told IPE: “We have received today’s announcement and will begin implementing the change.
“We will contribute our expertise and experience for the good of the pension system and the organisations concerned,” said the CEO, who has been leading AP1 since August 2020.
Around the corner in the Swedish capital, AP4’s CEO Niklas Ekvall said the government and the pension group, with representation from all parties, had now communicated their view of changes to the buffer fund system.
“It is now our task to implement their decisions in the best possible way for the pension system,” he told IPE.
Ekvall said it was good and natural to regularly review the pension system and buffer funds to ensure it lived up to its objectives, and to ensure Swedes had confidence in the pension system.
“The AP funds were involved in the investigation that was carried out, and we were given the opportunity to comment via our consultation responses.
“The starting point for consolidation is to manage the fund capital in the best possible way in the future,” he noted.
“The AP funds are proud to have delivered high returns that have helped to strengthen the pension system,” he said, adding that the funds had built up competent, professional organisations with a strong culture and investment processes.
“The good returns, cost-effectiveness and our sustainability work are at the forefront of international comparisons,” said Ekvall.
AP3 told IPE that the decision from the government and the pensions group would now be implemented in the best way for the pension system, and similarly to AP4 – the fund now set to be its only peer in Stockholm – said the AP funds had constructed skilled, professional organisations.
“We should see this as an opportunity to build even stronger asset management organisations and attractive workplaces,” a spokeswoman for the SEK534bn fund said.
Meanwhile Katarina Staaf, CEO of AP6 – which, with SEK75bn under management, is the smallest of the five funds by far – saw positives in the decisions that had been taken on the reform, even though it meant the fund itself would disappear as a separate entity.
“In our response to the consultation in October, we said that if they decide to integrate AP6 with AP2, the legal set up for the new AP2 must be changed,” she told IPE.
“And the most important change was being able to have a higher proportion of unlisted assets, otherwise the pro-forma assets would be too large. And it’s very nice to see that this specific point, which was crucially important, is what they intend to do,” she continued.
Staaf said the politicians had taken account of the fund’s comment that the integrated AP2 had to have a different investment policy from the other buffer funds, to create space to include the competence of AP6.
“So our successful model of managing these assets – they’ve tried to make space for it in an integrated unity,” she said.
“I think that in an integrated version of the two AP funds, we will have good potential to continue with our successful way of managing these assets,” she noted.
Staaf said she read the pension group’s proposal regarding AP6 as a recognition of the fund’s success.
“They are seeing what successful work we have done and what kind of return that generates, year after year, in this strategy we have had… more than a decade. Every year since then, we have had a positive return in absolute terms,” she said.
Eva Halvarsson, CEO of the SEK445bn AP2 – into which AP6 is set to be consolidated – commented on the reform, saying that, so far, the fund only had the information contained in the press release.
“We will, of course, do our best to incorporate AP6’s operations into AP2 in Gothenburg, with the ambition that this will be as good as possible for the Swedish pension system,” she said on the fund’s website.
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