SWEDEN - First State Investments, the Australian fund manager, is de-registering four of its flagship funds from the Swedish premium pension system, PPM, managed by Pensionsmyndigheten, the Swedish Pensions Agency, due to transparency concerns and issues with so-called mass-transfers.
Mass-transfers refers to a phenomenon where financial advisors use Internet bots, also known as web robots, to access client information and swap between funds in the system. These transfers can be done for 100,000 members at the same time.
According to the agency, these mass-transfers create problems for the fund companies that suddenly get large buy or sell orders.
This, in turn, can also have a negative effect on the other fund holders and cause problems for the IT system of the Pensions Agency.
It is unclear when First State Investments took the decision to de-register its funds.
Earlier this month, Pensionsgruppen, a multi-party working group in pensions, proposed making these transfers illegal, after much criticism from the Pensions Agency and fund management companies.
The Swedish government is now looking into the law change required, and the agency will take steps within its IT systems to make the transfers impossible. The change is expected to be implemented within months.
Eva von Sydow, head of European sales at First State Investments, has called for a discussion about the fund industry regulation and governance in Sweden.
She further noted that better oversight and increased transparency within the system would be better for both investors and fund managers, adding that First State Investments welcomed the new regulatory initiatives in the area and would continue to follow the developments with interest.
Some of First State's funds are close to capacity limits, and the company said the Pensions Agency did not offer enough transparency about the unpredictable inflows and outflows into the funds.
Von Sydow said the company was concerned about significant and often unpredictable trading volumes, which are hardly ever or never communicated to the fund manager, and how these affected First State's ability to manage the funds
In other news, the Ethical Council, a collaboration between the four Swedish national buffer funds AP1, 2, 3 and 4, increased its resources and thereby its ability to work more proactively during 2010, according to its annual report.
At 2010 year-end, the council was engaged in direct dialogue with around 10 companies, with the aim of bringing about the implementation of certain measures. Simultaneously, external consultants were in dialogue with 100-200 companies on behalf of the Council and other clients.
New dialogues started in 2010 are with Veolia, Alstom and Mototola Solutions.
The issue with Veolia is that it "has been associated with violation of the Fourth Geneva Convention by delivering custom administration and operation services for a tram linking western Jerusalem and settlements that are located on Israeli-occupied Palestinian territory".
The council's objective is "for the company to discontinue its involvement in the project or for the company to transparently and reliably demonstrate that the project is being carried out in accordance with the wishes and interests of the Palestinian population".
Alstom is delivering the custom-made trains operated by Veolia, while Motorola Solutions has "delivered a custom-designed monitoring system to the settlements on the West Bank".
The council said: "Those settlements that are located on occupied Palestinian land violate international humanitarian law (including the Fourth Geneva Convention), which has been confirmed by the international court in the Hague."
The council concluded fewer dialogues compared with previous years as a result of companies becoming better at self-regulation and improvements.
However, Annika Andersson, head of corporate governance and information at AP4 and council chair in 2010, said the dialogue with Walmart highlighted "a case where a drawn-out dialogue has thus far only resulted in modest improvements being made".
"A number of large institutional investors have expressed concern over Walmart's stance, primarily on labour law issues," she said.
The council did conclude its dialogue with the mining company Vedanta in 2010. Its objective involved the suspension of Vedanta's planned mining operations in the Indian state of Orissa, or, alternatively, the company proving it had carried out a transparent evaluation process demonstrating that the rights of the indigenous population had been respected.
The objective was achieved as a result of the Indian authorities' decision to refuse to grant a mining licence, rather than the dialogue.
Lastly, the local authority of Katrineholm has appointed KPA Pension as the pension fund manager for its SEK5.5m (€620m) pension assets for a period of four years.