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Pension Funds

Investment limits relaxed for Swedish pension funds under new proposal

Four of Sweden's AP funds, representing a collective 1.3 trillion Swedish kronor ($149 billion) in assets, could see the rules around how they invest relaxed under proposals outlined by the Ministry of Finance.

The proposals would see AP1, AP3 and AP4, all Stockholm; and AP2, Gothenburg, allowed to invest up to 40% of their funds in illiquid assets. A 5% limit on investments in unlisted assets would be removed.

The funds would also see the minimum requirement for investing in fixed-income securities lowered to 20% from 30%.

"In brief, the proposal entails an increased degree of freedom regarding investment rules," said a representative at the Swedish Ministry of Finance in an email. "This means that a larger proportion of funds than today can be invested outside the stock exchange, while reducing the requirement for interest-bearing securities. The aim of the proposal is also to strengthen and clarify the regulations governing the management of sustainability issues in the funds."

The proposal also does away with a requirement that at least 10% of their assets are managed externally. The rules call for responsible and sustainable investments without impacting the demand to deliver high returns, according to the law.

The proposal is now open for consultation, but the aim would be to implement the changes in July 2018.

A spokeswoman for AP1 said as a proposal "we have a positive view on it. It will increase the AP funds' possibilities to deliver returns as the limit for fixed-income securities will be lowered from today's 30% to 20%." The opportunity to invest further in illiquid assets is also good, she added.

Marten Lindeborg, chief investment officer and deputy CEO at AP3, said executives "are currently evaluating the new information and therefore not going to comment on it. However, as one of the consultation bodies, we (are) going to give our comments on the proposal in due time."

A spokeswoman for AP4 was unavailable to comment by press time. A spokeswoman for AP2 could not be reached for comment.

The proposal is available in Swedish on the ministry's website.

Bloomberg contributed to this story.