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IPE special report May 2018

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PPM kickback rates set

Sweden’s Premium Pensions Authority (PPM) has finally disclosed its revised kickback rates for the management of pension contributions totalling SKr50bn (E5.8bn) from 4.1 million Swedes due to commence in autumn 2000.
The squeeze on fees for asset managers winning over Skr7bn in assets will still be tight however, with the investment company retaining 0.12% of any fee whilst having to give a kickback rebate to the PPM of 96% for any further charge to the client.
A manager charging 1.2% in this higher bracket would therefore be rebating 1.04% of the overall fee.
The new rebate levels were amended after fund managers voiced dismay at previous suggestions they could receive only two basis points for transactions.
Managers with less than Skr70m in assets, however, will retain a higher flat fee of 0.4% and pay a kickback rate of 25% on anything charged above this level.
And the rebate levels will run on a sliding scale in proportion to the amount of assets under management so that a company running between Skr300-500m in assets retains 0.30% and pays out 85% of the excess.
Hans Nyman, director of legal affairs at the PPM, comments: “ This is the rate we are setting for the foreseeable future depending on how the system operates. We will carry out a review of the rebate system in three to five years.”
The PPM has also set the maximum number of funds that can be registered for the system at 15 for individual management companies and 25 for any one group.
Negotiations are currently under way between the PPM and investment managers over final registration agreements for the system.
Nyman says approximately 50 managers, mostly foreign, have expressed an interest to participate and affirms that the process will be completed in the next two months.
“ I guess some of the Swedish players are unhappy with the fee levels because they will get a bigger share and end up paying larger rebates, but the international managers are saying that they can work with the levels.”
Ola Björkmo, partner and head of asset management at Stockholm based Öhman Asset Management, believes there will be winners and losers amongst managers under the fee structure.
“ Smaller investment managers and the foreign players will gain from marketing exposure as well as trying to win business. However, fees are being pushed hard and some of the larger Swedish have been making noise that they still might not join the system because if they are successful the business margins are very tight.
“ They have to be in though really because it is their domestic market.
“ Personally, I think the PPM have got the levels about right.”
Hugh Wheelan

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