Swedes Become World Champions With 100% Stashing Cash in Funds

(Bloomberg) --

Swedes are the world champions in mutual fund saving.

In fact, when including the privatized part of the government pension fund system, 100% of working Swedes have some part of their savings in a mutual fund. But even excluding that, the proportion tops out at about 80%, almost double the share among U.S. households.

“Not many countries measure the proportion, but it’s difficult to beat 100%,” said Fredrik Petterson, chief analyst at the Swedish Investment Fund Association, after releasing a study mapping the past 40 years.

Forward-looking political decisions that subsidized and embedded funds in the pension system, financial sophistication of households and not the least a surge in stock markets over the past decades have made funds a part of everybody’s life, according to the study.

The vast pile of savings could come in handy for households on rainy days, helping to shield consumption and the economy from knocks. The export-reliant economy is weakening, with Brexit and trade tensions raising risks. Unemployment is also expected to have bottomed after a long boom, and question marks remain about the housing market direction after sharp declines in late 2017.

The foundation for saving in funds was laid in the 1980s, when the government subsidized mutual fund savings through the so-called Allemansfonder program, according to Johanna Kull, a savings adviser at Avanza. That sent a clear signal about the importance of long-term saving and created good habits, she said.

And the introduction of the programs also came at a good time, with a long equity market rally poised to commence in the early 1990s.

“Fund saving has contributed to the fact that private individuals have benefited from the fantastic stock market development we’ve seen over the past 30 years,” said Kull. “It’s a strong contributing factor to Swedes’ savings being at record levels today.”

Sweden’s fund savings represented more than 30% of Swedish households’ financial wealth in 2018. In 1980, it was less than 1%.

That wealth has also increasingly found its way outside the country. While in 1990, 86% of stock investments were in funds investing in Sweden, they accounted for only 25% in 2018. Some 57% of fund savings where in stocks, which have been relatively stable over the past three decades. Fixed income funds have lost some share to mixed funds.

To contact the reporter on this story: Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Niklas Magnusson

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