The evolution of the
Swedish fund market

When the Swedish Investment Fund Association was founded in 1979, there were 17 funds with a combined worth of SEK 1 billion.
At the beginning of 2016, Swedish savers have access to some 2,500 funds in the Swedish market, and net fund assets total over SEK 3,000 billion. This paves the way for competition and diversity.

Increased competition and new distribution formats

The years since 1979 have seen funds shift from exclusively investing in Sweden to investing all over the world. Foreign fund management companies have established a presence in Sweden and the majority of the Swedish market’s current range of funds are registered abroad. Most of the capital is, however, still invested in Sweden-registered funds.

Household's net savingsIn 1999, the four big banks’ fund companies accounted for 85% of net fund assets. By 2014, the corresponding share was 59%. Two factors have been key in this shift: firstly, the increasing importance of fund-based saving for pensions has resulted in fund companies with insurance links gaining a larger share of new savings, and secondly, technical developments, with the development of fund marketplaces, have made it easier for new players to reach customers. Fund marketplaces have been launched by both new players and the banks, offering a wide range of both their own and external funds.

From a situation in which direct saving in funds with a fund company predominated, we now have one in which it is possible to save in funds in a variety of different ways, from endowment insurance and investment savings accounts, to occupational pensions and premium pensions. The introduction of the investment savings account in 2012 has helped break a trend in households’ fund-based saving, and since its introduction,the majority of households’ private fund-based saving has been via an investment savings account.

Investment Savings Accounts for fund companies – vital to competition

The aim of the investment savings account, ISK, is to simplify and stimulate saving, and to increase the competition for savings by reducing the fiscal lock-in effects – a goal that is achieved by not levying capital gains tax in conjunction with sales or switches of funds. But the fact that fund companies were not given the right to offer investment savings accounts means that these companies must engage banks and securities institutions so that their customers can benefit from the tax advantages offered by the account. This constitutes a substantial competitive disadvantage for fund companies.

Equity funds dominate fund-based saving 

 

Savers choose index funds

Interest in index funds has increased markedly in recent years. Much of the new saving in equity funds has been invested in index funds, primarily in Sweden funds and global funds. SEK 85 billion of the net total of SEK 74 billion invested (2010–2015) has been invested in index funds, while actively managed funds have posted net withdrawals of SEK 11 billion. Index funds’ share of the total net worth of equity funds has increased from 8 percent to 13 percent since 2010.

Net saving in equity funds and index funds 2010-2015

Sweden has competitive fund fees

Fund fees, averageFund fees in the Swedish market have fallen in recent years, due in part to the effect of an extreme interest rate climate on the price of fixed income funds, and in part to longer term trends, such as increased saving in index funds. The annual fees for Sweden-registered funds are, in comparison with other countries, very competitive for equity funds, balanced funds and bond funds. The average fee for money market funds is slightly higher than the European norm, but the average fee for equity funds in Sweden is 1.37 %, in comparison with the European average of 1.71 %.

If the ways in which savers have actually invested their money is taken into account (net worth-weighted average), the Sweden-registered funds’ fees are lower still, with Swedish equity funds offering the lowest fees in Europe at 1.09 %. Deposit and withdrawal fees are, furthermore, rarely used in Sweden.

Why Swedes save privately in funds

Further reading:

More facts: The importance of funds for individuals, companies and society

More facts: The milestones that made Sweden a world champion in fund saving

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