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Nordic roundup: Swedish AP funds, WWF, OECD, AMF, Morningstar

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The Swedish branch of the WWF has criticised Sweden’s AP funds over their investments in coal, gas and oil.

The WWF found that five of the six buffer funds owned shares in 133 of 200 of the most carbon dioxide-intense companies in the coal, gas and oil sectors.

Håkan Wirtén, secretary general at the Swedish WWF, called on Parliament to change the share-ownership directive to allow the funds to divest fossil fuel-heavy holdings and invest in renewable and sustainable energy.

He said the AP funds’ current investments did not tally with the goals Sweden and the rest of the world had expressed in striving to avoid the consequences of “catastrophic” climate change.

AP1, AP2, AP3, AP4 and AP7 own shares in 133 companies in the industry, including Exxon Mobil, Chevron and Total.

In other news, private pension assets in Sweden amount to approximately 70% of GDP, lower than in Denmark, Finland and Iceland, according to OECD’s Pension Markets in Focus 2013.

Of the select 20 countries, Denmark tops the list, with private pensions constituting 200% of GDP, followed by Iceland’s 150%.

In both Canada and the US, pension assets amount to more than 100% of GDP, and in Australia and Finland more than 90%.

The assets considered include pension funds, book reserves and pension insurance contracts, as well as other pension vehicles, but pension funds constitute the bulk of the assets at 67.9%.

The OECD’s weighted average asset-to-GDP ratio for pension funds increased from 73.5% of GDP in 2011 to 77% in 2012, above the 2007 year-end level of 75.6%, with the Netherlands still achieving the largest ratio in 2012, at 160.2%.

Three countries achieved ratios above 100% in 2012 – the Netherlands (160.2%), Iceland (141.0%) and Switzerland (113.6%).

In addition to these countries, the UK, Australia and Finland exceeded the OECD asset-to-GDP ratio of 77%, with 95.7%, 91.7% and 79.3%, respectively.

Lastly, analysis by AMF, the Swedish insurance and pensions provider, shows that equity and balanced funds with low fees perform better on average than more expensive funds.

The analysis was conducted by AMF based on fund statistics from Morningstar.

According to the analysis, Swedish equity and balanced funds with fees below 0.5% have on average outperformed funds with higher fees, both over a five and 10-year period.

One explanation is that the lower fee translates to more returns for the savers, with fees in more expensive funds eating into part of the excess returns.

The clearest difference in performance between funds with high and low fees can be seen among balanced funds.

On average, funds with fees below 0.5% over the past 5-10 years have returned 1-2 percentage points more than expensive funds.

The lowest average return was found in funds with fees above 1.5%, where the difference in performance compared with the cheapest funds was 4 percentage points per year over a five-year period.

Swedish equity funds with a fee lower than 0.5% have returned 14% on average during the past five years and 12% over a 10-year period, equivalent to 1 percentage point per year in outperformance compared with more expensive funds.

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