SWEDEN - The SEK225bn (€24bn) AP3 fund, one of the Swedish buffer funds, is in talks with the Swedish government about the relaxation of alternatives investment rules.

Dan Bergman, head of risk allocation at AP3, told delegates at the Pensionsummit 2008 in NaardenVesting, in the Netherlands today, the fund expects the Swedish government to implement changes by next summer.

Under the current regulatory framework, the fund is only allowed to invest a maximum of 5% in unlisted assets, except in the case of real estate, and is not allowed to invest in commodities.

"This is a problem for us since many alternative beta strategies are in the space of unlisted assets, or at least on the border," said Bergman.

The fund is keen to increase its exposure to what it calls traditional alternatives, such as private equity, as well as more modern forms such as alternative beta investments.

Bergman also said the fund will focus on increasing its current exposure to timberland from 0.8% to 2% - a strategy AP3 has built up since 2004 with investments in Sweden, though the fund now wants to diversify its timberland portfolio globally.

Real estate investments, currently at 2.3%, will also increase globally.

The fund sees property, timberland and infrastructure investments as a good diversifier and hedge, since it expects these asset classes to be fairly uncorrelated to its equity exposure, which is 50.5% of its entire assets.

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