Sweden’s investment funds lobby says the information given so far by the new agency tasked with procuring funds for the premium pension system’s fund platform has caused worries that tendering procedures might end up seeming unfair.
At the end of last week, the Swedish Fund Selection Agency (Fondtorgsnämnden) – which only received the green light to start operations this summer – gave a status update on its platform with more detail about how and when its tendering process would happen.
Fredrik Nordström, chief executive officer of the Swedish Investment Fund Association (Fondbolagens förening), told IPE: “We are keen that the new PPM [premium pension] system gains a high degree of trust among both investors and fund companies.
“We want a system where investors can find good funds that suit their preferences, and where it is possible for successful quality funds to take part,” he said.
However he added: “It is difficult to reconcile large degrees of freedom for the authority with the new procurement legislation”.
Nordström said his association hoped the new Fund Selection Agency would find a way to deal with this.
“It’s important that the procurements are not subject to review due to criteria that are perceived as discriminatory, or because they deviate in other ways from the principles in the procurement legislation,” he said.
The Fund Selection Agency is tasked with creating a reformed version of the funds marketplace (fondtorget) platform within the first-pillar defined contribution premium pension system.
The idea is that it will procure funds for Swedes to choose between, reducing the number of funds on offer but improving the quality. This is a change from the current arrangement where all approved comers are allowed to market funds.
The 482 funds on the current platform will be terminated as the procured funds become available and premium pension savings – those not managed by the default provider AP7 – will be transferred to the new range.
Nordström said that while the agency had said the first procurements would to be announced in Q1 2023, as yet there had been no documentation published on how the criteria would be constructed.
“Due to the information from the authority last week there are concerns over how the new legislation will be implemented,” he said.
Were the authority to be given unlimited, or at least very far-reaching powers to end contracts with fund managers and switch them to funds without a competitive procurement process, the CEO said, he warned there could be room for managers to try legally challenging the procedure claiming it to be incompatible with the legislation.
“It is often forgotten that a procurement legislation safeguards the producer’s rights,” he said, adding that the law sheltered firms from subjective decisions by authorities.
“Since it is difficult to set the criteria right from the beginning, it will always be in the interest of any fund selector to have the freedom to be subjective,” said Nordström.
“Regardless of whether this is a good practice or not, it can create complications if fund managers that are excluded use it as a reason for legally challenge the procurement,” he told IPE.