2018 Knowledge Brokers

Stefan Lundbergh

In his long career in the pension world, working in everything from research to investment strategy, Stefan Lundbergh has faced many thorny problems. But the most urgent may have been the one he tackled in 2017. Lundbergh, who as director of Cardano Insights heads up the think tank for the Rotterdam-based pension advisory firm Cardano, was given an unusual assignment: Develop a plan to improve parts of the Swedish public pension system.

Cardano, a risk management, investment management, research, actuarial, investment advisory, and fiduciary management firm, works with large defined benefit plans, as well as governments, advising and managing over €120 billion in assets. At Cardano Insights, which he’s headed for about five years, Lundbergh focuses on research and, as he puts it, “Communicating about that research in practical terms for decision-makers.”

It was the summer of 2017 when the Swedish ministry of finance contacted Lundbergh with a request: Could he head up a pilot study of the Swedish premium pension system? Back in 1994, the Swedish government had changed its pension system to have two parts. There was the income leg, which was a pay-as-you-go system with a buffer where pension contributions were paid by those in the workforce and used to pay retirees the same year and a buffer fund for dealing with the demographic humps. The other part, called premium pension, otherwise known as PPM, was somewhat like a 401(k) plan within the public pension system. Individuals invested their “own” pension contributions into private mutual funds listed on a PPM platform or chose a default option, a globally indexed equities fund.

Trouble was, the system’s architects of PPM expected that people would take an active interest in learning about their alternatives and actively participate in monitoring and investment. Instead, says Lundbergh, “Most individuals would make a choice once and then forget about it.” Worse, the government accepted any private mutual fund, as long as it had been approved by the regulator in a EU country, without engaging in further due diligence. As a result, 850+ funds were ultimately listed, including some from rogue firms engaging in misleading sales tactics—or outright fraud.  
Finally, after several years of hand-wringing, with no action, the Swedish parliament decided it had to address the problem head-on. With that, it hired Lundbergh to evaluate the situation and form a roadmap for reform with a variety of alternative courses to take. His report’s final recommendations focused on first introducing clear goals—for example, pinpointing the acceptable level of risk—as well as a good choice architecture that helps novices with little interest in investing. To help those who are interested in making their own investment choices, he proposed appointing an official to procure the mutual fund for the PPM platform. The government now has appointed an implementation review who are working out the details of the final plan.

For Lundbergh, the effort was a fascinating look into the importance of behavioral economics, particularly related to individuals’ savings and investing habits. “It was a really fun project,” he says. “It was a way to apply behavioral economics to a practical problem and move toward a positive direction.”

Lundbergh’s background working with private and public pension funds in various capacities stood him in good stead. Before joining Cardono, he was at the Dutch pension fund giant APG, where he was part of the investment team and headed up strategy, among other assignments. Before that, he worked for Skandia Life Insurance Co. in Sweden. Lundbergh is a non-executive board member of the Fourth Swedish National Pension Fund (AP4). “I’ve seen pensions from a great many angles,” he says.

By Anne Field

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