How To Beat The Swedish Total Return Index

By investing passively you outperform most of the professional fund management industry. But how can you invest passively and beat the index?

In Sweden, the Spiltan Aktiefond Investmentbolag has managed to beat the Swedish Total Return Index (SIXPRE) in eight of the nine years since its start in 2012 despite being managed more or less passively:

Spiltan Aktiefond Investmentbolag performance. Source: Website.

The strategy is simple:

Buy a basket of investment companies and hold them for a long time. A basket of investment companies makes sure you are diversified in both public and non-public companies but should produce alpha over time (see more below for why).

The fund is heavily concentrated toward just four holdings (year-end 2020): Investor AB (27%), Industrivärden (24.1%), Kinnevik (11.7%), and Lundbergföretagen (9%).

When 72% of the portfolio is centered around just four companies it must be pretty risky? Not really, because each underlying investment company is diversified. Moreover, all four companies have a history of outperformance. For example, Investor AB has beaten the Total Return Index for over 100 years:

You might ask: why pay Spiltan to manage your money when you can invest directly into these companies yourself?

An investment in Spiltan Aktiefond Investmentbolag has three advantages:

Spiltan Aktiefond Investmentbolag charges low manage management fee:

The current annual management fee is only 0.2%, although Spiltan’s mandate is higher. You get charged a passive fee.

Additionally, the fund has another huge advantage mostly overlooked by investors:

Spiltan Aktiefond Investmentbolag lets you delay or reduce taxes (or both):

To invest via a mutual fund makes a lot of sense, for example, for those who are liable to Swedish withholding taxes.

Let’s assume you invest in what we consider one of the best long-term investments in Sweden, Investor AB. It’s an attractive investment because it has beaten the Swedish market for over a century, but at the same time it offers an attractive “income” as most of the profits are paid out as dividends. Dividend investing has gained a lot of attention, and many investors have developed an irrational dividend bias.

The dividend might be taxable depending on your situation. If you reside outside Sweden, the dividend is taxed at source (withheld) at 15% (or more – depending on tax treaties). The tax is, of course, quite unfortunate as the profits from Investor AB are taxed for the second time. Taxes are a strong headwind to overcome for a long-term investor:

Spiltan, which is domiciled in Sweden and exempt from taxes, pays no taxes on the dividends received. Dividends are reinvested into the fund. Thus, you only face potential taxes on capital gains when you later redeem units. Furthermore, you can later “engineer” your taxes, as explained in the linked articles below:

Spiltan Aktiefond Investmentbolag lets you sit on your ass:

By investing via a mutual fund you are less likely to make behavioral mistakes. You save, invest, and forget about it. The easier you make your investments, the better you’ll do.

Why invest in Spiltan Aktiefond Investmentbolag:

We own units in Spiltan because of the simplicity: buy and forget. However, your goals might be different than ours. We have in previous articles talked fondly about the advantages of investing in investment companies:

Investment companies make a lot of sense, because:

  • Investment companies are like an active mutual fund
  • Very low “management fee”
  • They have skin in the game
  • They allow you to do what you should when investing: do nothing – sit on your ass

We offer, of course, no insights on the future returns of Spiltan Aktiefonder Investmentbolag. However, we believe this is a smart way to invest because of the above four reasons. The drawback is that you pay 0.2% annually to Spiltan, but we believe this is offset by the potential tax savings and simplicity.


Disclosure: We own units in Spiltan Aktiefond Investmentbolag. We are not financial advisors. Please do your own due diligence and investment research or consult a financial professional. All articles are our opinion – they are not suggestions to buy or sell any securities. 


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