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Sweden's AP7 looks at alternatives

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SWEDEN - The SEK14bn (e1.55bn) national PPM default fund Sjunde AP-fonden (AP7) is currently considering whether it can invest in alternative asset classes under the country’s PPM legislation, according to Peter Norman, managing director at AP7.

If the legislation allows this, the fund will collect data on both hedge funds and private equity in order to conduct an asset liability model study (ALM) on the data.
“Provided the outcome of that study is positive on these asset classes we’ll propose it to the board and hopefully we can start investing in them in the beginning of next year,” says Norman.

The fund has not yet decided how much it will invest in alternative investment, if possible at all, and it will wait until an ALM study has been concluded. Whether cash will go into domestic or international vehicles depends also on the study, says Norman.

“The aim of the fund is to produce a risk-efficient return that is as good as it can be to our customers. As we have this efficient frontier we want to move it as northwest as possible and that’s the whole strategy really. And hopefully these two asset classes can help us in this,” he says.

The fund is also in dialogue with AP6, the state first pillar pensions buffer fund that already invests in Swedish private equity.

AP7 is expecting a cash inflow in mid June as the contributions from those who earned their first wages eligible for state pension in 1999 are paid in. Norman believes that even if the amount is not big, the ratio of people not making an active choice is going to be lower than last year (some 67%).
“If you look at the big election period last year it is obvious that the people who had the least money, the youngest and the oldest, were not too eager to make an active choice,” he says.

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