17 June, 2024

Information regarding the review of the Swedish buffer fund system


A review of the Swedish buffer fund system was launched at the end of last year. The assignment was to propose ways to modernize and streamline the administration of the Swedish buffer fund system.

The review, which was made public on June 17, 2024, contains of four proposals that are proposed to be subject to further handling by the owner and the political process. In summary, the proposals concerning AP6 are about “Better utilization of the Sixth Swedish National Pension Fund’s specialist expertise in high-return unlisted shares”.

As far as AP6 is concerned, it is welcomed that the review chooses to highlight AP6’s niche expertise that has created high returns for the Swedish pension system.

The review contains four main proposals that are to be subject to further handling by the owner and the political process.

Simplified summary of the investigation’s main proposals.

1. AP6 is consilated into AP2

• A larger and broader fund with many different asset classes gives many benefits (liquidity management and currency risk management) and some economies of scale, which increases cost efficiency…
• … but the mission of the consolidated fund will over time lead to the reduction of the portfolio of unlisted shares – buyout and venture capital funds/co-investments. This is likely to lead to a decrease of unlisted shares’ share in the buffer system.

2. AP6 remains as a fund and is intregrated into the buffer fund system

• AP6’s specialist skills (unlisted assets: risk capital funds, venture funds and co-investments) are taken care of and made available to other AP funds and the unlisted shares’ share in the buffer system consists.
• … but the benefits of being part of a larger, broader fund is not taken care of. To counteract this, it is proposed that the requirement for currency hedging is abolished and that the fund is given borrowing rights from The Swedish National Debt Office (Riksgälden), who is the central government financial manager.

3. One of the AP funds in Stockholm is liquidated and its operations and capital is transferred to one or two of the remaining Stockholm funds

• Large potential for efficient, rational and effective management of the capital and, in the long term, a higher net return.
• … at the same time it is a complex process, with considerable direct costs and significant risks – which must be taken care of – in order to not risk lost returns during implementation.

4. Increased cooperation between AP funds

• In order to make the most of the economies of scale, the Stockholm funds are co-located and cooperate with each other when it concerns support functions of an administrative nature. The collaboration should too be expanded in areas closer to administration, without that of the funds independence is compromised. In this way, the cost efficiency is increased, to lower risk than in the consolidation option.
• …but economies of scale in asset management are not taken advantage of.

For more information:
Ulf Lindqvist, Head of Communications AP6: +46 708 74 10 48