SimCorp has been re-appointed by the Swedish state pension fund Sjunde AP-Fonden (AP7) as provider of its investment management system following a public procurement process.
AP7 completed a thorough market analysis and evaluated four tenders across eight quality criteria in its search for an investment management platform that spans across the front-to-back value chain.
“We were looking for an integrated platform that fulfilled as many of our RFP (Request for Proposal) requirements as possible. The high-level scope has primarily been focused on Back Office and Middle Office functionality but also on Front Office functionality to some extent,” says Tina Nylund, AP7’s Chief Operating Officer.
“It has also been of great importance that the system vendor has a strategic roadmap with a clear vision and high commitment in Research & Development,” Nylund adds.
The eight quality criteria
- Functionality – Front Office
- Functionality – Middle Officer
- Functionality – Back Office
- Product and Technology
- Service and Support
- Information Security
- IT Architecture
AP7 has traditionally focused on investing in publicly traded stocks and bonds. However, the pension fund's investment portfolio is set to evolve in the coming years.
Beginning in 2023, new regulations will allow AP7 to gradually allocate up to 20 percent of its assets to alternative asset classes, including real estate and infrastructure.
“Everything from obtaining the necessary knowledge in-house in terms of the products, to more practical questions such as how to make valuations will be areas that needs to be addressed. For us, it is important to view the AP7 and SimCorp cooperation as a true partnership, and to have confidence that SimCorp’s products will be able to address not only today's needs but also new challenges in the future,” Nylund says.
In addition to the expanded investment mandate, AP7 is also subject to new sustainability regulations that require the pension fund to manage the assets in an exemplary manner through responsible investments and responsible ownership.
Even before this legislation, AP7 has for many years been an active institutional investor and made thematic and company-level engagements alongside other global investors.
AP7 already incorporated sustainability into its investment strategy by dedicating a portion of its listed equity portfolio to companies that offer solutions to climate and environmental problems, including water-related issues. In the private equity space, AP7 has a focus on investing in clean technology companies.
Furthermore, AP7 is now actively working on developing a transition portfolio aimed at investing in companies that need to transition and where the pension fund can contribute to climate initiatives through its investments and ownership role.
For us, it is important to view the AP7 and SimCorp cooperation as a true partnership, and to have confidence that SimCorp’s products will be able to address not only today's needs but also new challenges in the future
Established in 2000 with SEK 15 billion (EUR 1.3 billion) in assets under management, AP7 has been a crucial player in Sweden's pension system ever since. It serves as the state-run alternative to private investment funds available within the Swedish premium pension system, providing a reliable and accessible option for Swedes to save for retirement.
Each month, employers in Sweden contribute 18.5 percent of an individual's salary (up to 7.5 times the income base amount) to the state pension. Of these contributions, 2.5 percentage points go to the premium pension, while the remaining 16 percentage points are allocated to the income-based pension.
With SimCorp as its technological backbone for the past 23 years, AP7 has experienced significant growth, currently managing assets worth over SEK 900 billion (EUR 80 billion) on behalf of more than five million Swedes, representing roughly half of the population.
The pension fund's financial returns have played a major role in this growth, accounting for more than half of the increase in assets under management.
If an active investment decision is not made, the premium pension capital will be allocated to AP7 Såfa portfolio, which is a multi-asset portfolio blend of the AP7 Equity Fund and AP7 Fixed Income Fund.
Nylund notes that AP7 is a small organization with a limited number of employees, and hence it is vital to have very efficient workflows and structures in place.
“The core process and the backbone for AP7 is to be able to calculate the NAV (Net Asset Value) for the Equity Fund and the Fixed Income fund, on a daily basis. So, with this in mind the whole Fund Administration side of the platform is of great importance to us,” Nylund says, and continues:
“The ability to view and monitor cash accounts, portfolio holdings, and the ability to create finance bookings and finance schemes with internal ledger as account structure comes also high on this list.”
The procurement process began in September 2022 and sees the continuation of a 23-year relationship between AP7 and SimCorp.
SimCorp offers industry-leading, integrated investment management solutions.
Our platform and ecosystem, comprising partners, services, and third-party connectivity empowers us to provide 40% of the world’s top 100 financial companies with the efficiency and flexibility needed to succeed.
With over 25 offices around the world, and more than 2,200 employees, we are a truly global, collaborative team that connects every continent and industry seamlessly.
For more information, visit www.simcorp.com.
AP7, Sjunde AP-fonden, is a government agency which, since the inception of the premium pension system in 2000, has the task of managing premium pension funds for the Swedish people.
AP7 is the only state actor in the premium pension system and provides the fund portfolio AP7 Såfa. AP7 Såfa is the default alternative for premium pension savers, which means that investors are automatically assigned to AP7 Såfa unless they choose otherwise.
Since its inception, AP7 Såfa has given savers higher average returns and lower fees than the private actors in the Swedish premium pension marketplace.
SimCorp:Søren Rathlou Top, Global PR & Communications Manager
+ 45 31 15 87 06