IPE Nordic Briefing: Swedish FSA on Alecta breaking the rules

The crisis around Sweden’s largest pension fund, Alecta – whose reputation was knocked in early 2023 by huge US bank losses – entered a new phase following an initial conclusion in a probe by the country’s financial watchdog at the end of July. 

The Swedish Financial Services Authority (FSA) said the SEK1.29trn (€110bn) occupational pensions giant had broken several regulations and that it was now transforming its investigation into a sanction review. This means the supervisory authority will now assess legally whether there are grounds for it to intervene.

As well as the losses incurred on investments in three niche US banks, Alecta’s public image has suffered from the dwindling value of its investment at home in the residential firm Heimstaden Bostad.

In theory, the FSA’s final decision and any action it takes could threaten Alecta’s position as default provider for traditional pensions in Sweden’s huge ITP occupational pension system.

Also in Sweden, AMF – the second-largest occupational pension fund – is facing a change of leadership at the beginning of next year, it has been revealed.

The SEK800bn blue-collar pensions provider is promoting its current chief investment officer Tomas Flodén to the top job on 1 January next year, when Flodén will replace chief executive officer Johan Sidenmark. The board decided it was a good time to pass the baton after 14 years with Sidenmark at the helm, and a spokesman for AMF said Sidenmark had agreed with that.

In its interim report, AMF reported a 5.7% overall return for the first six months of this year, while remarking that the domestic economy would take a while to recover.

Meanwhile AP7, the second-largest pension fund in Sweden – a state-run fund which is invested in an entirely different manner from Alecta or AMF – revealed its default premium pension product had produced a six-month return of 16.1% by the end of June.

This beats the average return of 14.9% produced by private funds in Sweden’s first-pillar defined contribution premium pension system, according to the information published.

Meanwhile in Denmark, pension funds – not including state-run ATP – produced almost 8% in returns on average in the first half of this year, according to an independent analysis. Labour-market scheme Pædagogernes Pension led the ranking compiled by independent pensions adviser Nikolaj Holdt Mikkelsen, followed by the pensions arm of the bank Nordea.

According to Holdt Mikkelsen, it had been an overweight of liquid shares, in particular of the largest US ones, and in part corporate bonds in the bond market, that had been the shortcut to a solid return for providers in the first half of this year.

Items to note:

• Storebrand, the Norwegian financial group that has been actively competing in the last few years for municipal pensions contracts, has commented on the latest development following its official complaint to the European Free Trade Association’s (EFTA) supervisory authority (ESA) about the failure of some local authorities to put their pensions business out to tender. The Norwegian government’s rejection of ESA’s official opinion risks muddying the waters around all public procurement rules, Storebrand has said.
• IPE is holding the latest IPE Iceland 2024 on 3 October in Reykjavik at the Harpa Concert Hall and Conference Centre, for senior Icelandic pension fund investors.

Rachel Fixsen

Nordic Correspondent