Sweden’s New Fund Selection Agency opens for business

Sweden’s new fund selection agency is now open for business and the first fund procurements will begin during the second half of this year, according to its website.

Created by a pension law passed last December, the Swedish Fund Selection Agency is a new independent authority that will procure, manage and review eligible funds in the Swedish Premium Pension System. He will also oversee fund selection for the $200 billion premium pension fund platform.

The Pensions Group, which includes representatives from the political parties behind the current pension system, said it believes the Swedish government should take more responsibility for the architecture of fund choice and the structure of the premium pension system. The premium pension is part of the general pension and is a form of social insurance designed to provide financial security during retirement. For individuals, the premium pension system involves depositing a payment equal to 2.5% of the pension base into a premium pension account with the Swedish Pensions Agency, which is the insurer for premium pensions.

The aim of the new independent fund selection agency is to ensure that the funds available in premium pensions offer high quality at a low cost. In accordance with the new law, the Swedish Fund Selection Agency aims to procure a wide selection of high-quality funds with different risk profiles. She will also be responsible for phasing out the current fund offering and transferring premium pension fund deals to the new funds market.

The current fund market is considered “application-based”, meaning that fund managers must apply to the Swedish Pensions Agency to secure a fund in the fund market. And if the fund manager meets the criteria, the fund management and the Swedish Pensions Agency enter into an agreement and make the fund marketable. There are approximately 475 funds in the current offering, which collectively manage over USD 91 billion of Swedish premium pension capital.

However, the new offer for fund management will be procured in accordance with the special standards that will be regulated by the new law. This means that different types of funds will be made available and that both the fund manager and the fund must meet certain conditions. New funds will be evaluated based on suitability, capability, quality, performance, sustainability and costs. Funds that best meet the evaluation criteria set out in each procurement can sign funding agreements with the agency, which will regularly evaluate and monitor the funds. As a result, the actual fund categories, as well as the number of funds procured within each category, can and do change over time.

The new law requires the fund offering to provide a variety of funds that are appropriate and suitable for the premium pension system, and that have a variety of risk levels and investment orientations. Funds must also be efficient, long-term, manageable and of good quality. Mutual funds, fund companies, special funds or specific alternative investment funds can be considered for the premium pension fund platform. According to the agency, among other things, a more precise framework will be established for the eligibility criteria of funds, categories and quality criteria for procurements.

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Tags: pension funds, Sweden, Swedish Fund Selection Agency, Swedish Pension Agency, Pension Group

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