Sweden’s Peter Norman shares views on AP funds inquiry

Sweden’s minister for Financial Markets Peter Norman has talked exclusively to InvestmentEurope about his views on the ongoing inquiry into the country’s AP funds, as well as European regulation, and the need for clearer fund fee information and personal finance knowledge at the retail end of the market.

What are your views on the inquiry into the future of the AP funds, commissioned by the Swedish government and due to report by 1 August?

In Sweden this type of work is done by independent authorities. There has been one person from the department [Ministry of Finance] involved as an expert. However, it is a point to note that the person leading the inquiry will draw their own conclusions and take responsibility for them.

The inquiry report will come 1 August, and then we will look at that and put it out on referral and then it will come back to the Government Offices of Sweden.

I don’t actually think that it is that dramatic. The funds have lived with their current regulations for 10 years, and the market has changed considerably. The unquoted market especially has developed, with new instruments and so on.

I therefore think there is reason to discuss partly how many funds there ought to be – today we have five buffer funds; the four big funds and then the Sixth AP fund – and partly what type of instruments they ought to be able to invest in.

I don’t know what the inquiry will conclude, and that’s how it should be. We shall see in August when it is ready.


Would you prefer the inquiry to make certain conclusions around diversification and use of instruments, given how the industry has increased its use of these in recent years and in mind of regulatory developments such as the AIFMD?

I have to be careful not to interfere with the inquiry, but generally you are correct that of course the ambition should be to get as much return for any given level of risk – in any management.

To achieve this in the AP funds and other funds, in the past 10 years, there have been new instruments. Put it this way, I would be surprised if the inquiry did not conclude that one should be allowed more alternative investments than is possible today – ‘for good reasons’.


When you look across the European single market today, is there anything that surprises you in terms of the opportunities for Swedish fund manufacturers?

I think the Swedish financial sector generally is very professional and very developed. We have one of the highest rates of fund investing. We have four big banks that are, in my opinion, being managed efficiently and professionally with a large offering. We have a private equity industry that is top class in Europe. We have a hedge fund industry that is top class in Europe.

We have manged to create, in Sweden, entrepreneurs combined with regulations and political decisions, a sort of hotbed for a good financial industry. That’s good for the financial sector, but also for the real economy.

My general view on this question is that the ability to grow and innovate is strong in the Swedish funds industry. I think Sweden is a winner if it becomes easier to market in other countries than before. So, I only see benefits for the Swedish industry if there is success in opening up more than previously.


What is your view on the discussions around consolidation in the Swedish fund industry, and the linked issues of product efficiency and cost?

I think funds are quite bad at explaining to customers what they actually cost. Funds have had to show their costs as a percentage of capital under management, but it is not that easy for customers to understand how that hollows out their capital over 10-20-30 years.

I am pleased that Morningstar has launched the so-called ‘Norman-belopp’ (Norman figure). It shows, if you put in SEK1,000 per month over ten years, what you pay in fund charges in kronor and öre on the basis of normal assumptions of return.

What is interesting is if, say, you [make a one-off investment of] SEK1,000 and leave it for 40 years, and put it into an equity fund that takes out a 1.5% charge, then half your capital will be gone – half will have gone to the bank.

This hollowing out process is very difficult to understand on the part of customers, and also difficult to explain. We need to impose stricter demands on the industry, to explain to customers what fees actually mean. I think funds have a job to do in this respect.

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