Issue 2, 2022

This Nordic Fund Selection Journal issue covers pressing topics in institutional investment, focusing on the impact of geopolitical events such as Russia's invasion of Ukraine on country risk management and emerging market debt. Nordic pension funds that successfully divested from Russia ahead of the conflict emphasize the importance of rigorous country risk frameworks combining ESG considerations and financial risk assessments. The discussion highlights how emerging market debt, despite inherent risks and occasional crises, continues to offer diversification and attractive risk premia, with active management being key to navigating complexities, including ESG challenges and geopolitical uncertainties.

The magazine also features leadership movements in Nordic institutional investors, such as the upcoming CEO transition at Sweden's AP3 and personnel changes at Danish pension funds. Varma's departing CIO, Reima Rytsölä, reflects on his tenure, stressing the integration of ESG in investment processes and a strategic overweight to the US market due to its dynamic economy. Conversely, Varma’s new head of real estate, Sampsa Ratia, underscores ESG as a pivotal factor shaping real estate investments and the potential for geographic portfolio expansion. Additionally, insights from VER’s CEO spotlight the evolving priorities around geopolitics, inflation, and climate transition in portfolio construction.

Further, the journal addresses systemic industry challenges, notably the fight against negative climate lobbying by corporations, facilitated through collaborative investor efforts to enhance transparency and accountability. It also provides perspectives on low expected returns and investment strategies to adapt to changing market conditions, as discussed in Antti Ilmanen’s new book. The issue concludes with curated book recommendations from industry professionals, offering both intellectual and practical insights for investors navigating complex global and financial landscapes.

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Table of content

Editor’s Commentary and Industry Overview

Reflection on major geopolitical events, such as the Ukraine invasion, and their impact on Nordic institutional investors. Discussion on staff changes and recruitment trends due to the COVID-19 pandemic and remote work adaptations.

News Analysis: Leadership and Market Shifts

Reima Rytsölä’s departure from Varma to become CEO of Solidium. Insights on Varma’s investment strategy, ESG integration, and outlook amidst geopolitical and economic challenges. Examination of monitoring processes at Nordic asset managers during market turbulences caused by the Ukraine conflict and sanctions on Russia.

Commentary on Norwegian Government Pension Fund Global

Proposal for splitting the Fund’s assets into three portfolios (buffer, pension, and generation funds) with tailored investment strategies accounting for differing risk tolerances and objectives, based on analysis by DNB.

Industry Movements: Recruitment and Executive Changes

Highlights of key appointments and exits among Nordic pension funds and investment management firms, including Mattias Bylund’s return to Sweden and leadership transitions at AP3, PFA, and ATP.

Interview with VER’s CEO Timo Löyttyniemi

Discussion of the war’s impact on markets and investments, the resilience of index-driven portfolios, evolving ESG policies including on defense stocks, and the pension fund’s recent legal and operational developments amidst ongoing geopolitical tensions.

Private Credit Market Outlook Amidst Inflation and Supply Chain Issues

Analysis of inflationary pressures, labor shortages, and supply chain disruptions affecting private credit underwriting with a detailed focus on the US healthcare sector as an example of sector-specific challenges and mitigating factors.

Country Risk Exclusions and Lessons Learned From Russia

Exploration of Nordic pension funds’ frameworks and decisions to exclude or divest from Russia ahead of the invasion; including insights on ESG scoring, human rights considerations, and evolving approaches toward emerging markets and geopolitical risks.

Emerging Market Debt Roundtable Discussion

Insights from Nordic investors and managers on emerging market debt allocations, return expectations, diversification benefits, ESG integration, impacts of current crises, and active versus passive management approaches within emerging markets.

In Conversation: Antti Ilmanen on Investing in Low Return Environments

Discussion of key themes from Ilmanen’s new book addressing the challenges of investing amid persistent low expected returns, the importance of realistic expectations, diversification, and managing portfolio risks with an open and adaptive approach.

Responsible Investing: Addressing Negative Climate Lobbying

Overview of initiatives led by Nordic investors, such as AP7 and the Church of England Pension Board, to establish global standards on responsible climate lobbying. Challenges in transparency, corporate trade association influence, and shareholder engagement efforts with companies like Volkswagen.

Book Recommendations From Industry Experts

A curated list of influential and insightful books recommended by professionals spanning topics from geopolitics and sustainable business to investing principles and market cycles.

Up-Close & Personal: Spotlight on Varma’s Head of Real Estate Sampsa Ratia

Profile and interview covering career path, pandemic challenges, ESG priorities in real estate investment, potential geographic expansion, and perspectives on portfolio management at one of Finland’s major pension funds.