If an asset manager beats his benchmark by a few basis points but loses a chunk of employees’ retirement savings, he does not deserve a bonus. That contentious position should get a full airing at Sweden’s National Pension Fund: The 56-year-old member of Sweden’s left-of-center Social Democratic party oversees the fund as minister for International Economic Affairs and Financial Markets.
Lund’s crusade against what Stockholm financiers dismissively refer to as “getting-out-of-bed bonuses” began in late May when a parliamentary report disclosed that state-run funds had awarded bonuses despite double-digit losses in 2002. One -- Tredje AP-fonden -- paid its 41 government employees bonuses averaging $34,800, notwithstanding a 12.6 percent loss. The rationale? The two-and-a-half-year-old fund had bested its benchmark by 0.6 percent.
“If we can achieve a 0.6 percent outperformance long term, we will have earned a lot of money for the Swedish pension system,” contends Niklas Ekvall, Tredje AP-fonden’s deputy CEO. “To beat the reference portfolio is a very tough task, and to receive a bonus for doing so is standard in this industry.”
Counters Lund, “If you have losses on this scale, no bonuses should be paid.” He’s expected to reach a compromise with the pension board.
