SWEDEN – The AP national buffer funds have yet again produced “below-par” investment performance, according to a report by the Swedish Finance Committee.

The report, presented to the Swedish parliament, looked at AP fund performance up to 2011 and found that the funds lost SEK22bn (€2.5bn) last year as a result of weak equity markets.

The committee said the AP funds had failed to generate the expected returns when the investment rules were first implemented in 2001.

None of the funds has reached its performance targets for the 2001-11 period.

Since the funds began managing the assets in 2001, the average return has been 3.3% per year, well below their own targets.

AP1 returned 1.2% during the last five years, compared with a target of 5.5% per year.

AP2 come closer to its target of 5% per year, by returning 1.8%, while AP3 has returned 1.7% against a target of 4%.

AP4 has a target of a real rate of return of 4.5% over a 10-year period, but only managed 2.5% between 2002 and 2011. AP6 did not hit its target either.

AP7, the default option in the country’s defined contribution system (PPM), has returned 0.11% annually, which is better than the privately managed fund within the system, down 0.4% over the same the period.

Meanwhile, AP7 is lowering its fees from next year by 0.01%.

AP7’s equity fund will be reduced from 0.15% to 0.14% and its fixed income fund from 0.09% to 0.08%.

Because AP7 does not have any profit targets and is not working to achieve a surplus, it will continue to lower its fees as its assets and revenues increase.

In other news, the employer organisation representing the Swedish Church is bucking the trend by presenting a new hybrid occupational pension plan for the 110,000 employees it covers.

The new agreement suggested would be a defined benefit solution for pensions up to 7.5 times the base amount and defined contribution for anything above.

Apart from introducing this to the church employees, the organisation, KFO, also wants to the hybrid plan to be introduced to the cooperative sector, which they also represent.

Another innovation is an idea to offer transfer rights for both the DB and DC portions of an individual’s pension.

The employer organisation is now awaiting the union responses to the idea.