The fund market consists of both active and passive managed funds (UCITS and AIFs) available for purchase. Simplified, active management involves an individual manager, co-managers, or a team of managers managing the funds by investing the means of the fund in different financial instruments. A passively managed fund is an index fund, which means that its portfolios mirror the components of a market index.

In recent years the two types of management has been greatly discussed in academic studies as well as in the relevant business community. Specifically, the annual fee that the management company charges has been of interest in the discussion. In conclusion, the discussion has considered that the differences between an active and a passive managed fund many times are not very significant. The holdings and returns of investment in both active and passive management are generally the same, even as the annual fee for an active managed fund is higher. At the same time, information about the fund available for the investors in Sweden is often deceptive. Often, the fund appears to be more actively managed than it actually is.

In 2014 the Swedish Government appointed an investigation to examine improvement of the Swedish fund market. The investigation introduced a report in 2016 including a proposal to regulate requirements for Swedish management companies to inform the public about the level of activity in its fund management. The Swedish Ministry of Finance has now processed this proposal. The proposal includes changes in both the Securities Funds Act and the Alternative Investment Fund Managers Act, requiring the management companies to provide information about the objectives for the level of activity in the management of the fund for the upcoming year in the fund’s information booklet. Furthermore, the companies should include information about the actual activity in the management of the fund for the past year in the annual report. This information should also be provided at the management company’s website.

For funds comparable to a relevant benchmark the proposal suggests that the level of activity should indicate the difference between the return of investment for the actual fund and the return of investment for the benchmark (tracking error). However, for companies managing funds not comparable to a relevant benchmark, the information should include the objectives for the upcoming year and the actual level of activity for the past year.

The reform aims to improve the access to information for investors and improve their ability to determine the level of activity in relation to the annual management fee and therefore be able to take this into account in their investments. Nevertheless, the proposal has been subject for some criticism. Specifically, some actors are worried the proposal will implicate too much of a burden on small management companies and make it difficult for AIF-managers to establish in the Swedish financial market. However, the Swedish Financial Supervisory Authority emphasizes that tracking error is a simple and inexpensive measuring instrument well known within the fund market. Therefore, the burden for the management companies should not be too great and it should not affect the establishment of AIF-managers, according to the Swedish Financial Supervisory Authority. The reform is expected to enter into force on the 1st of January, 2018.