The government’s spring fiscal policy bill for 2007, which contains its proposed guidelines for economic and budgetary policy, suggests that the fund will be allowed to invest up to 10 per cent of its assets in foreign equities.

“We are very pleased with the suggested changes, which have been under discussion for several years. This will provide us with the ability to generate better returns and stretch our investments into the rest of the Nordic markets,” says Erling Gustafsson, CEO of AP 6.

Of the five AP funds, AP 6 differs from the others as it is allowed to invest only in Swedish small and medium-sized growth companies with the aim of contributing to the development of Swedish industry. It also has a mission to contribute to regional development by investing in companies throughout Sweden. The other buffer funds (AP 1 to AP 4) are all permitted to invest up to 40 per cent of their assets abroad.

“Our main mission is still to invest in Swedish companies, but the new legislation will simplify our investment process. The current limitation has been hard to deal with in practice, due to the cross-border nature of some of our investments. We will, however, only be looking to invest in the Nordic region when the new regulations are put into practice,” says Mr Gustafsson.

The current regulation has posed problems, since the fund’s investments often unintentionally cross over into the rest of the Nordic region. According to Lars Gavelin, senior advisor at the Ministry of Finance, the changes will remove a rule that has been impossible to follow.

In 2000, the government initiated a review of the Swedish buffer funds’ investment regulations. Suggestions made in 2004 pushed for all AP funds to be governed by the same regulations, allowing AP 6 to invest 40 per cent of its assets abroad. Final proposals, however, lowered the amount to 10 per cent in order to safeguard AP 6’s particular mission of investing in the Swedish market.

But the fund is not disappointed. “We are rather pleased about being allowed to invest abroad at all. But the exact number is for the politicians to decide upon,” Mr Gustafsson says.

The new legislation will be effective from 1 November 2007.

AP 6 returned 16.1 per cent before costs last year, significantly better than the 2005 returns of 11 per cent.

CL

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