Nordic pension giant the Swedish Fund Selection Agency (FTN) is on the hunt for active Swedish and European small cap equity managers in a SEK 46 billion ($4.6 billion) tender.
The government agency is planning to select 10 Swedish and four European small cap funds, in a move that will affect 334,000 premium pension savers.
“Investing in smaller companies generally involves higher risk but has also yielded high returns in the long term. FTN deems that these two categories are suitable for the premium pension fund platform and that they contribute to the freedom of choice for savers,” the agency’s executive director Erik Fransson said in a statement.
The premium pension, which the FTN procures funds and managers for, is part of the Swedish state pension and is a defined contribution system which receive 2.5 per cent of workers’ pensionable income every year.
Members of the system can choose the level of risk and strategies for their savings. AP7 Såfa is the default government option for those who do not make a choice.
The premium pension is in net inflow and its assets are expected to grow to €400 billion ($451 billion) by 2040. The FTN will procure funds worth SEK1.1 trillion ($112 billion) between 2024 and 2027.
Last time the agency sought out small cap strategies was in actively managed Nordic equities and it awarded four managers with a collective mandate worth SEK 8.8 billion ($902 million) this February.
More asset owners are revisiting small cap strategies as a useful diversification from US mega cap equities and active managers are essential for identifying companies with sound fundamentals.
The agency is also currently reviewing applications for two tenders in actively managed and passively managed Swedish mid/large cap equities, worth SEK 100 billion ($10 billion), and one for actively managed global mid/large cap equities worth SEK 200 billion ($20 billion).
The next fund category to be procured is IT and communication sector equity funds, which covers SEK 124 billion ($13 billion) as of 31 March 2025. Notices of procurement are expected in late August or September.
There has been a concerted effort to lift the quality of funds and reduce fees on the premium pension platform. As Fransson told Top1000funds.com in an interview last year the number of funds on offer has reduced from 900 to 450. Remaining funds are re-tendered to access the ability of best-in-class managers.
Meanwhile, managers themselves also have to pay a tender fee and if they are successful, a platform fee based on assets under management. The FTN was hopeful that it is an effective measure to deter managers without a good chance of success from going through the lengthy RFP process.
The premium pension platform does not offer access to private markets.
Applications for the Swedish and European small cap strategies need to be submitted before June 16, 2025.
