Swedish occupational pension provider Alecta has been fined SEK 50m by Sweden’s financial regulator, Finansinspektionen (FI), over its investments in Heimstaden Bostad.

In addition to the fine, FI has also issued Alecta with a warning following its investigation into its investments in the real estate group.

Its investigation, launched in September 2023, found that Alecta failed in its risk management and did not invest its assets in a way that best serves the interests of current and future pensioners.

FI’s rules specify that investments made by pension providers must be prudent and focus on the interests of current and future pensioners.

Commenting, FI director general, Johan Almenberg, said: “Managing and investing pension contributions is a matter of trust. Pension managers, therefore, need to keep a close eye on the risks associated with the investments they make.

“Essentially, it is about safeguarding pensions and generating a good return for current and future pensioners. Viewed in a broader context, Alecta’s actions raise an issue that deserves attention and a wide-ranging discussion on what the rules of the game should look like for operators managing pension savings.”

Serving 2.8 million private customers and 37,000 corporate customers, Alecta is one of the largest investors on the Stockholm Stock Exchange, with approximately SEK 1,331bn in assets under management.

To date, Alecta has invested a total of approximately SEK 50bn in Heimstaden Bostad but wrote off SEK 12.7bn of this in February 2024, which, at the time said was due to a rise in interest rates.

FI’s investigation centred on several of Alecta’s investments in the firm made between 1 October 2019 and 31 August 2023.

One of the issues identified by FI related to Alecta’s decision to enter into a shareholders’ agreement with other owners of Heimstaden Bostad. This, it said, was “highly complex” and had a significant impact on the company’s investments.

FI’s review showed that this shareholder agreement allowed for significant differences in influence over the governance of Heimstaden Bostad. At the same time, Alecta had extremely limited opportunities to divest the investment.

Overall, FI concluded that Alecta’s investment in Heimstaden Bostad carried a higher risk than for other property investments in general. It, therefore, breached the legal requirements applicable to the company’s investment activities by making these investments.

FI head of insurance, Leonard Weber Linnarsson, said: “Occupational pensions are incredibly important to many people. It is absolutely essential that companies managing pension funds identify risks and ensure they can be managed in accordance with the law.

“It is equally self-evident that investments must be made with pensioners’ best interests in mind. Alecta has failed to do this, which is why we are taking action against the company.”

In response to the fine, Alecta said it agreed with FI’s conclusions.

Alecta CEO, Peder Hasslev, said: “We have taken note of the FI’s decision and naturally take the criticism very seriously. Alecta agrees with the authority’s conclusions that there were shortcomings in risk control and risk management regarding the investments in Heimstaden Bostad.

“We consider the shareholder agreement in Heimstaden Bostad to be unbalanced as a whole. In 2023, we launched a comprehensive improvement programme focusing on governance, risk management and expertise within our asset management. The improvement programme has now been implemented, which has made Alecta stronger and more secure for our customers.”

In addition, Alecta said “significant changes” have been made to Alecta’s management team since 2023, with a particular focus on asset management. The measures set out in its improvement programme have also been fully implemented.

The company said it will assess whether there is cause to take further action following today’s decision by FI.

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