Swedish state fund “wholeheartedly” backs Kay, endorses Stewardship Code

Swedish state buffer pension fund Första AP-fonden (AP1) says it wholeheartedly backs Professor John Kay’s call for long-term shareholders to take ownership responsibility – saying his findings are “generally applicable”.

“The Kay Review highlights the need for long-term investors that take shareholder responsibility. This is a position that is shared wholeheartedly by Första AP-fonden,” the SEK233.7bn (€28bn) fund says.

Being a “long-term and engaged owner that makes demands” is a central component of AP1’s management model. As previously reported by Responsible Investor, the fund is reducing its equities portfolio to take a greater role at investee companies – another key recommendation of the government-backed Review.

AP1 also shares Kay’s criticism of quarterly reporting as a source of short-termism.

“The review was based on the situation in the UK, but most of the conclusions it draws must be considered more generally applicable,” the fund states in its latest Ownership report.
Despite AP1’s support, the government-backed KayReview has come in for scathing criticism from some quarters, not least from the influential figure of former City minister Lord Myners who called it “contradictory” and “irrelevant”. Oxford University’s Gordon Clark called Kay “muddled”. In addition, the industry is at best lukewarm about Kay’s proposal for an investor forum.

“A long-term and engaged owner that makes demands”

Notwithstanding, AP1 has also endorsed the Stewardship Code, one of the few major international asset owners to do so, alongside investors such as the Ontario Teachers’ Pension Plan (OTPP).

AP1 would welcome a similar code in Sweden as it would “bring foreign institutional investors into constructive dialogue with the company boards” and benefit everyone who invests in Sweden. But conflicting codes in different countries would be “unfortunate”.

Last month the fund announced an 11.3% investment return in 2012, boosted in part by its farmland holdings in Australia and New Zealand.