At the end of 1996, of the 686 funds run by members of the Swedish Mutual Funds Association, almost 500 were equity funds accounting for around 63% of the total $46.4bn under management.

Making up the number, were 148 bond vehicles and 53 mixed funds.

Sweden has had a bias to-wards equities since the mu-tual fund industry began in the late 1950s. The growth of the industry however, has been dictated, to a large de-gree, by tax changes rather than by the performance of securities markets.

Over the last five years, assets under management in Swedish mutual funds have been growing by more than 19% pa., (+28% over last year) but the pick up in enthusiasm for funds can be traced back to 1978 when a new, tax incentivised, savings plan was introduced. Money could be plac-ed in deposits or investment funds as long as it was held for five years. But, with equity markets booming throughout much of the 1980s, those people invested in equity funds never looked back.

Since that time, a variety of tax incentives have been used, usually favouring equities. Most recently, in an effort to stimulate private provision for pensions, a tax efficient individual pension savings scheme was introduced which allows invest-ors to save through bank de-posits, investment funds or shareholdings. Despite the fact that the mutual fund industry is heavily bank orientated, investment funds have been a major beneficiary.

The big five Swedish fund managers - Sparbanken/Robur, S-E-Banken, Nordbanken, Handelsbanken and Foreningsbanken - manage almost 85% of the Swedish market between them. Again however, fiscal policy has dictated fund location to a certain extent with a large number of groups establishing offshore operations to avoid domestic taxation. At the end of last year, some 54% of funds were situated offshore, mostly in Luxembourg.

According to Susann Franzen of Svensk Fondstatistik, mutual funds are primarily a retail vehicle in Sweden. The insurance and pension companies, for whom unit linked contracts have become very popular, tend to run their own investment funds outside of the retail market.