Swedish buffer fund AP4 searching for asset manager for new water portfolio

The size of the mandate, for which managers can pitch until August 20, is unknown.

AP4, one of Sweden’s five buffer pension funds with €32.7bn in assets, has launched a search for an asset manager to handle a new portfolio consisting of companies that it says will focus on “addressing the global water shortage.”

In a statement, AP4 did not disclose the size of the investment mandate. It is long only/active in nature, and performance will be measured against the MSCI World index. Relevant asset managers have until August 20 to submit their qualifications.

A fund official told RI that the amount to be invested hadn’t been decided yet and that it would likely vary over time. In its questionnaire to managers, it has asked for management fees based on volumes of €25m, €50m, €75m, €100m and above.

“We’re not doing this out of charity alone,” said Mats Andersson, AP4’s Chief Executive, adding that, on the contrary, “our sustainable investments will lead to better long-term-returns for future retirees.” Andersson could not be reached for additional details like the size of the mandate before deadline.

Elaborating on its reasons for investing in water, AP4 said: “To include sustainability is a necessity for successful and long-term investing.(As a result,) our management works continuously to develop different strategies when they meet AP4’s criteria for sustainability and profitability.”

News of the mandate comes almost two months after the left-wing Swedish government announced a sweeping restructuring of the five AP buffer funds. The move is designed to cut costs and boost efficiency and will see AP6, the smallest of the group, absorbed by AP2. The fate of AP1, AP2, AP3 and AP4 has yet to be decided. The reform also entails a clear legal requirement on the schemes to invest sustainably – something they have been doing voluntarily for years.

The reform has in any case been sharply criticised by Andersson and his counterpart at AP2, Eva Halvarsson. The Financial Times recently quoted Halvarsson as saying the planned reform would reduce the spread of risk and the relative independence enjoyed by the AP funds.

Per Bolund, Sweden’s financial markets minister, rejected the suggestion that the entire pension framework could be jeopardised. He told the FT: “That is exaggerated. We would never suggest something that would harm the pension system.” Link (Swedish)