Seven years have passed between the initial plan to create a procurement agency for Sweden’s premium pension system and the results last month of that new state body’s first procurement exercise.

IPE interviewed Erik Fransson, executive director of the Swedish Fund Selection Agency (Fondtorgsnämnden, FTN), in the agency’s new premises in Stockholm’s Tumba suburb the day after the SEK11bn (€960m) tender award to six asset managers.

“The amount of financial value that we can create for our savers is enormous,” he said.

“If we can improve the average return by 50 basis points by lower fees and higher-quality managers, higher returns – and I think 50 basis points is the lower end of realistic – the amount of extra pension we can create is quite substantial,” said Fransson.

It is the FTN’s task to procure a new, slimmed-down set of funds for the approximately €100bn currently invested in privately-managed funds via the old premium pension funds platform.

“That’s also why it puts a lot of pressure on us,” he said.

“If we’re doing things wrong, it’s most likely bad for savers, bad for pensions and bad for fund companies. So we can’t afford not to be good – that’s quite tough,” Fransson said.

Fransson Erik-

“If you are able to cooperate, that’s when you can really produce at a high level”

Erik Fransson, executive director of the Swedish Fund Selection Agency (Fondtorgsnämnden, FTN)

Before becoming executive director of the FTN, Fransson was director of the fund department at the Swedish Pensions Agency, and was previously global head of distribution strategy at SEB Wealth Management.

The FTN’s first procurement, for actively-managed large/mid-cap European equity funds, reduced the average fee for the funds in the category to 0.21 from 0.48 percentage points, according to the agency’s procurement report.

Fund providers have been feeling the pressure too, under the new, rigorous premium pension procurement regime.

AMF Fonder, which won one of the six new mandates, commented that the process had been “tough but at the same time good for our development and rewarding”.

To offer their products on the old platform, fund providers could successfully apply as long as they had a UCITs fund that was approved by the Swedish financial regulator.

“You didn’t have to be a good manager,” Fransson said.

To succeed now in the FTN’s institutional tier one procurement process, however, he said, fund companies had to be professional, have better products, have their processes in place, and have “better people” to qualify.

“I think its good for the whole Swedish fund industry, because if it helps AMF and other fund companies in their organisation, it’s going to be of value for their savers outside our platform as well,” he said.

‘Matrix’ organisation

Fransson was a key player in developing the idea of the FTN, and then took charge of building up the agency itself from scratch.

“Even though we are a state agency, we can never be better than the sum of our people, so that’s been a challenge,” he said.

“We work in more of a matrix organisation to avoid having silo mentality,” the FTN chief explained. “Everything we do is cross-functional, team-based, in order to get all skills involved in all the processes.

“That is one of the keys behind our quick time to market, because our work is so complicated that there is no one individual who knows everything – but if you put a team together, you are able to know everything as long as you cooperate,” Fransson said.

“If you are able to cooperate, that’s when you can really produce at a high level.”

“It has been the most challenging and also the most rewarding”

With its cross-functional structure, it has been important at the FTN to have sharply defined roles and for everyone to be aware of them, in order for processes to be very efficient, he said.

“We want all searches to have the same quality, which means that the organisation has to be more of a machine, and we have to avoid personal biases in our selection process.

“Our challenge is that we have 30 categories and the government wants us to be done within a three-year period, so we will have to do a lot of searches in parallel.

“Working on five searches in parallel means we have to have processes in place to make sure all the searches have the same high quality,” Fransson said.

Despite the pressure, Fransson seemed positive on a personal level when asked how his role as FTN executive director compared with previous jobs:

“It has been the most challenging and also the most rewarding – at the moment; we’re not done yet,” he told IPE.

“It’s very rewarding to be part of a process where you go from an idea to something in reality. There are a lot of steps in between,” he said.