Sweden Gives Its Four Buffer Funds More Investing Flexibility

Pension back-up vehicles can now allocate more to illiquid, alternative asset classes.

Swedish Parliament has given the nation’s top buffer fund for its state pension system the green light for more illiquid and alternative investments.

The legislature, known as the Riksdagen, passed a bill which would alter the investment rules for all four of Sweden’s AP systems, which have a collected $155.4 billion in assets under management.

The buffer funds, also known as additional pensions or AP, are essentially emergency savings vehicles that back up the pension system’s assets.

Ossian Ekdahl, AP1’s acting head of communication, told IPE.com that the move is “good for both current and future Swedish pensioners,” but would not comment on how and if the measure would immediately impact AP1’s investment portfolio.

The move allows the four funds more flexibility with their illiquid and alternative investment decisions, and cuts the minimum allocation for interest-bearing securities to 20% from 30%.

It also eliminated the requirement that funds dedicate a piece of their assets to be managed externally.

The new law also requires funds to manage their assets with sustainable development in mind.

The changes will go into effect on January 1, 2019.

The only Parliament members that did not vote in favor of the bill last week were from the socialist left party, Vänsterpartiet.

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