AMF, Sweden’s second biggest workplace pension provider, said the shift in pension savings toward market-rate or unit-link arrangements from traditional, with-profits pensions could threaten Sweden’s leading position in Europe as a generator of corporate growth and value.
Noting the conclusion in a new study that within Europe, Sweden and the rest of the Nordic region are doing relatively well in terms of growth and value creation, Thomas Flodén, chief investment officer at the blue-collar pensions firm, said: “Pension capital is well suited for investments in venture capital, as investments in new technology, restructuring and new companies are by their nature long-term and illiquid”.
However, he said occupational pension capital was increasingly being driven from traditional insurance towards ordinary funds within unit-linked insurance that did not have the same opportunities to make these early and long-term investments in venture capital.
“It is a development that in the long term may threaten the Swedish success in investing early in conversion and innovative industry,” said Flodén in a commentary on AMF’s website.
Flodén was responding to an article in business daily DI.
In the newspaper piece, Magnus Tyreman, the European head of consulting firm McKinsey, cited a new study showing that European business had lagged behind the US in growth, profitability and research, and gave his views on how Europe could close the gap.
AMF said that according to the McKinsey study, Europe lagged behind the US in eight out of 10 technologies, but that Sweden and the rest of the Nordic region were doing relatively well in the European context.
Tyreman said one reason for that comparative success was the Nordic region having a strong venture capital market and the fact that pension funds were allowed to invest in it, AMF said.
“In Sweden, we have large managers of collectively-agreed occupational pension capital, such as AMF, Alecta and KPA,” said Flodén in response.
“We all have the opportunity to get involved early in companies and technologies, which has contributed to, among other things, the establishment of new industries in the wake of climate change, but also to the growth of several Swedish tech companies,” he said, citing Spotify, Zettle, Yubico and Embracer as start-ups in which AMF had invested at an early stage.
“This enables good pensions as well as competitive Swedish industry and Swedish job opportunities,” he said.
“Unfortunately, occupational pension capital is increasingly being driven from traditional insurance to ordinary funds within unit-linked insurance that do not have the same opportunities to make these early and long-term investments in venture capital,” he said.
AMF had SEK715bn (€66.5bn) of assets under management at the end of September.
At that point, the bulk of AMF’s pension assets, SEK544bn, were in the form of traditional, with-profits, pension provision, while market-rate pensions accounted for SEK171bn, according the Stockholm-based firm’s most recent interim financial report.
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