SWEDEN - The Swedish Premium Pensions Authority (PPM), facing criticism for its fund selection tool "Lotsen" earlier this month, has appointed rating firms S&P Fund Services and Wassum Rating AB.
Financial terms were not disclosed. The ratings will be integrated into the information used by "Lotsen" as well as being posted on the website. PPM spokesman Mats Öberg told IPE that the inclusion of fund ratings was a project started long before Lotsen was launched.
"When we worked on the development of Lotsen we said that one future improvement would be to publish fund ratings. But of course as we do it to improve Lotsen we hope that it will be more appreciated".
He said that S&P and Wassum were chosen as these two combined offered the best coverage of the 750 funds PPM is currently offering. Nevertheless together they only cover 200-250 of the funds in PPM's portfolio.
For the moment no additional appointment of rating firms is planned, Öberg said. He hopes that - especially among Swedish fund managers - more interest to become rated will be generated.
S&P stressed that they start with a quantitative screening on the ground of risk-adjusted return and only the best 20% make it into the qualitative steps of the process - therefore it is impossible to have full coverage.
Another argument for choosing two rating firms was that PPM did not want to label one single company as being the best in that field. "Our intention was not to appoint the best rating firm but to supply the pension savers with a better information for their difficult decision to allocate their savings" Öberg said.
The ratings will be published on the PPM website www.ppm.nu from early next year.
PPM currently has 5.5 million customers - pension savers representing the working population of Sweden - and each year an equivalent of 2.5% (capped at SEK28,000 (€3,006) per month) of each tax paying worker's salary is invested in funds selected through the PPM platform.
This year the PPM will administer SEK 25bn (€2.68 billion), which is expected to grow by approximately SEK 1bn (€100 million) every year.