SWEDEN – The Swedish government says it will review the “mutual independence” of the AP buffer funds after the funds showed less risk diversification than expected.
The Ministry of Finance said: “The government intends to come back to the issue of risk diversification between the Funds and the associated question of the mutual independence of the Funds.”
It added: “A comparison of the yields from the First-Fourth AP Funds since mid-2001 indicates a lesser degree of risk diversification than could have been expected as a result of dividing the buffer capital of the pension system into four separate funds.
“All the indications are that this is due to the Funds interpreting their assignments in a similar way, but an additional factor is apparently that the Funds have so far made very little use of opportunities for active management.”
It said: “With regard to the management of the First-Fourth AP Funds, the government notes that the returns so far have shown little deviation from the comparative index, which indicates a low level of risk-taking.”
And it added: “The costs for managing the Funds appear out of proportion to the degree of management activity, a point the Government intends to keep a continued watch on.
“The Government also notes that good results must be produced in the years ahead in order to achieve the targets set by the Funds boards.”
The government said the First, Second, Third and Fourth AP Funds reported good results “in absolute terms” in 2003 - due to rising equities prices.
“I am pleased to note that the AP Funds have achieved good results in absolute terms and that a significant part of previous losses have been recouped,” said Gunnar Lund, minister for international economic affairs and financial markets.
“I am also satisfied with the AP Funds increased activity concerning holdings, which can be expected to have a positive effect on the long-term yield of the funds.”
Meanwhile, finance minister Bosse Ringholm is meeting four opposition parties on June 16 to discuss using the equivalent of 17% of the AP funds' assets for disability payments.