The Swedish National Debt Agency, Riskgaldenskontoret, has advised the government to scrap private equity buffer fund Sjätte AP-fonden, AP6, and hand its Skr12.8bn(E110m) to the other five state buffer funds.
Riskgaldenskontoret is one of the institutions, which include the other AP funds, that have been called on to express their views on the set-up of AP6, whose assets constitute 2% of the funded pension system.
The government launched this consultation in early June, with an end-September closng date for responses, Some 20 had been received by then.
AP6, which posted a 0.5% return for the January-August period, concentrates on Swedish private equity. It has been a bone of contention for months, with critics pointing to its relatively high management costs.
AP6 has management expenses of Skr340m. Its sister funds, which are all much larger, spend on average Skr230m.
A spokeswoman for the National Debt Agency told IPE that in its response to the preliminary report aimed at about 40 institutions connected with the buffer fund, it
had clearly spoken against AP6.
“We think the costs of running AP6 are too big, it has Skr12bn in unlisted shares, the kind of money the other buffer funds could manage at a lower cost.”
She added: “This is our mission, after all, to lower costs for the state and abolish the costs that are not necessary,” she said, but added she did not think the government would scrap AP6. Gunnar Lund, minister for international economic affairs and financial markets, has backed AP6 in a recent press interview, the finance ministry official said.
The official outlined the main aspects of the report: AP6’s investment strategy and the setting up an official way of withdrawing resources from the fund, in case of necessity.
The government plans to let the fund divert up to 40% of its private equity portfolio to foreign markets. AP6 should also be “brought in line” with the other buffer funds with the issue of withdrawal of funds in case of necessity.
A team of legal experts is to study responses and report back to the government this winter. A further proposal would then be prepared and presented to parliament in the spring.
Parliament could come to a decision in the latter part of next year, a spokesman for AP6 said.