Widespread fund-based saving could, by generating opportunities that offer households easy access to equities and bonds, be said to contribute to a democratisation of the financial markets.
Welfare for households
Funds have been a natural part of Swedish households’ private savings since the mid-1980s when the “Allemansfonder” public savings programmes were launched and helped enable hundreds of thousands of people throughout Sweden share in the growth in equities markets. Nowadays, funds help secure people’s future post-retirement livelihoods and act as a natural building block in every element of the pension system, for example. For many years now, therefore, the investment fund industry has helped create welfare for households in Sweden.
Funds’ share of the equities listed on the stock market has doubled over the past 25 years, from 6 % to 12 %. Which means that one in every eight Swedish krona invested in the stock market is owned by fund savers. And if foreign fund management companies’ shares are included, this percentage is even higher. All of which makes fund savers one of the stock market’s biggest ownership groups.
Saving in funds enables social growth
Fund-based saving is an important component of both corporate and State financing. It enables investments in innovation, development, and welfare, and thereby helps create both job opportunities and growth.
As owners, the fund management companies can contribute to corporate development. Active corporate governance is part of generating the optimum return for savers in line with the fund’s investment orientation, risk and sustainability profile. Corporate governance may range from exerting influence and engaging in dialogue on sustainability issues, to participation in the work of nomination committees in order to ensure good Board composition.
At the EU level, work is proceeding on drawing up an overall European strategy for a sustainable economy by examining ways in which the financial system can finance growth in a sustainable way. The investment fund industry has an important part to play in this work.
Sweden needs Swedish funds
An efficiently functioning investment fund market requires healthy competition and a diversity of operators. Specifically Swedish legislation should be avoided if we are to continue to have fund management companies based in Sweden. Creating healthy, long-term operating conditions for the Swedish investment fund sector benefits both society and savers.
Just under one third of all of the funds available to Swedish savers are based in Sweden. Countries such as Luxembourg and Ireland have, for many years now, been working single-mindedly on attracting investment fund operators and, with them, large numbers of highly skilled jobs.
Swedish funds still account for around 80 % of the Swedish fund sector’s net assets, but the marked increase in the number of funds in the new millennium is, in principle, exclusively due to foreign-registered funds. Swedish funds are not sold to a corresponding degree in other countries, with Sweden-registered funds accounting for only 2.2 % of the total net assets of funds in Europe.
The increase in the number of fund management companies operating in the Swedish market is due to the arrival of foreign companies, while there has been a decrease in the number of Swedish ones. The thresholds for starting new fund management companies are now substantially higher than before, largely due to an increasingly complex regulatory system that has a greater impact on smaller companies.
Building a competitive investment fund market that chooses to be based in Sweden is clearly desirable. Fund management company operations generate tax revenues and skilled job opportunities. Savers also benefit from having fund management companies that play an active part in societal development and which have a geographical proximity to their customer base.