Issue 6, 2023

The December 2023/January 2024 issue of Nordic Fund Selection Journal highlights several key themes in the Nordic institutional investment landscape. A prominent focus is on Nordic asset owners' increasing interest in forestry investments as part of their alternatives portfolios. Denmark’s Velliv and Sweden’s SPK have made notable allocations into forestry over the past year, attracted by diversification benefits, stable cash flows, inflation protection, and emerging opportunities linked to the green transition, such as carbon credits and growing demand for timber in sustainable construction. Both pension funds emphasize learning from past timber investments and adopting a more cautious, long-term, and sustainable approach, reflecting a shift in mindset toward optimizing mature alternatives portfolios.

The magazine also explores challenges and evolving philosophies in fund and manager selection across Nordic investors. Insights from Nordic selection teams reveal that identifying true manager skill—as distinct from luck—and balancing quantitative data with qualitative assessment remain core hurdles. There is widespread interest in employing new tools, including artificial intelligence, to enhance selection and monitoring, though skepticism remains about AI's current utility in predicting manager outperformance. Additionally, strategic manager allocation—integrating internal and external portfolios and active tactical tilts—plays a critical role in mitigating risks during volatile periods.

In-depth interviews with leading Nordic pension fund executives, including AP3’s CEO Staffan Hansén, reveal a deliberate re-examination of investment strategies amid a new interest rate environment and sizable allocations to unlisted assets. AP3 focuses on active value creation in its alternatives portfolio rather than mere growth, advocating portfolio optimization within constraints. Furthermore, in a roundtable discussion, Norwegian investors and emerging market equity specialists highlight a cautiously optimistic outlook for the asset class, emphasizing its relative undervaluation, evolving market resilience, and increasing relevance in global diversification despite geopolitical and ESG complexities. Complementing these themes, commentary on decarbonizing the mining industry underscores the critical tension between mining’s environmental footprint and its essential role in enabling the green transition, calling for nuanced ESG assessments and coordinated policy efforts.

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Table of content

Introduction and Overview

Issue #06, December 2023 | January 2024 of Nordic Fund Selection Journal covers new forestry investments by Nordic asset owners, manager selection philosophies, emerging market equities discussions, and an interview with AP3’s CEO Staffan Hansén. The issue includes news analysis, selector insights, up-close profiles, and book recommendations tailored for institutional investors.

Nordic Investors Make New Forestry Investments

After a decade of focus on alternative assets, Nordic investors, including Sweden’s SPK and Denmark’s Velliv, have renewed interest in forestry investments for diversification, inflation protection, and climate-related returns. The article explores challenges and lessons learned from previous forestry investments and highlights the increasing importance of sustainable and carbon-focused forestry strategies.

Thoughts on Manager Selection Challenges and Improving Processes

Insights from Nordic selection teams shortlisted for the Nordic Fund Selection Awards 2023 focus on challenges in manager selection such as identifying true skill versus luck, aligning interests, and evaluating succession planning. The teams discuss misconceptions, allocation difficulties, and future plans to improve manager selection processes using AI and refined sustainability assessments.

Fund Selection Changes at Danske Bank

A reorganisation at Danske Bank led to the departure of Susanne Bolin Gärtner as head of fund selection. The fund selection function was integrated into the investment products and offerings department under Martin Hagman, marking a strategic shift within the bank’s investment structure.

Book Recommendations for Investors

Industry professionals share their reading lists for the holiday season, recommending titles such as “Beyond Diversification” by Sébastien Page, “Jackass Investing” by Michael Dever, and biographies of prominent innovators like Elon Musk. The selection includes investment theory, alternative risk premia research, leadership lessons, and reflections on historical turning points.

Interview with AP3’s CEO Staffan Hansén: New Mindset for Alternative Investments

Staffan Hansén discusses AP3’s review of its large unlisted portfolio amidst rising interest rates and market challenges. The pension fund is shifting focus from endless allocation growth to active value creation and portfolio optimisation within alternatives, mindful of diversification and maturity constraints. The interview covers emerging market exposure strategy, internal vs. external management, IT infrastructure upgrades, and leadership culture.

Selector Insight: Manager Selection Philosophy at AP Pension

Rasmus Bartholdy explains AP Pension’s disciplined approach combining scientific quantitative assessment and qualitative analysis to identify true investment skill. The process includes detailed manager due diligence, onsite visits, handling behavioral biases, and the importance of board approval for new mandates. He also discusses tactical allocation, portfolio concentration, and the cautious adoption of AI in manager selection.

Roundtable Discussion: Norwegian Investors on Emerging Market Equities

Norwegian investment professionals share views on the outlook for emerging markets (EM), contrasting long-term potential versus short-term challenges. Topics include the changing nature of EM economies, regional allocation preferences, China’s role and risks, geopolitical considerations, ESG engagement challenges, and the evolution of EM manager research and selection.

In Conversation: Decarbonising the Mining Industry

Carmignac’s Michel Wiskirski discusses the mining sector’s energy intensity and its pivotal role in the green transition. He emphasizes the importance of looking at CO2 emission trends rather than absolute levels due to country grid differences. Discussions cover operational improvements, decarbonisation limits linked to public energy policies, ESG progress, and challenges for mining companies globally.

Up-Close & Personal: Industriens Pension’s Anders Ellegaard

Profile of Anders Ellegaard, head of fixed income at Industriens Pension, highlighting his career journey, leadership style influenced by sports, investment philosophy focused on understanding and diversification, and reflections on ESG, current market concerns, and balancing work with personal life.

Industry and Publishing Information

Details about Tell Media Group, Nordic Fund Selection Journal’s publishing schedule, upcoming Nordic investment events including roundtables and forums in 2024, advertising partners, and subscription information are provided. These promote engagement with Nordic institutional investors and selectors across various asset classes.