Table of content
Insourcing versus outsourcing among Nordic institutional investors
The insourcing trend at Nordic institutional investors has plateaued due to political risk, market complexity, low interest rates, and uncertain equity outlook. Some, like Swedish foundation KK-Stiftelsen, are shifting to external managers to handle all assets, emphasizing growing complexity and need for external expertise. Surveys indicate enthusiasm for in-house management has waned, with some investors increasing external management.
Nordic regulators increasing oversight on alternative investments
Danish and Swedish financial regulators have intensified monitoring of alternative investments amid concerns about investors’ knowledge and risk management. Swedish regulator Finansinspektionen is mapping institutional alternative investments and related risks for the first time; Denmark is increasing supervisory bandwidth following political attention on pension fund exposures.
Executive pay as a consideration in manager selection
Despite increasing shareholder scrutiny on asset manager executive pay, Nordic institutional investors largely do not make remuneration practices a deal breaker in manager selection. They emphasize shareholder policies promoting reasonable compensation but acknowledge emerging attention to excessive pay and its alignment with long-term investor interests.
Challenges in finding uncorrelated hedge fund strategies
Denmark’s Realdania struggles to identify truly uncorrelated hedge fund strategies for its alternatives portfolio revamp. Many funds claiming uncorrelation underperform during market stress or have unproven track records, complicating diversification goals. Realdania continues exploring areas such as reinsurance and special situations, cautious about investability and track record authenticity.
Swedish clampdown on misleading fund names
The Swedish Consumer Agency is expanding banned fund names to prevent misleading investor impressions, including words like “safe” and potentially “absolute return.” Many fund managers and insurance companies are changing fund names to comply. Regulatory tension exists between the Consumer Agency and the Swedish FSA regarding fund name approvals.
Institutional investor perspectives on real assets investment
Nordic investors discuss real assets strategies focusing on diversification, inflation protection, and long-term cash flows. Concerns include rising prices, disruption risks, political volatility, and illiquidity. Investors express divergent views on infrastructure and real estate, noting the importance of internal resources, strategic asset allocation, and due diligence amid a crowded market.
Currency hedging: approaches and challenges
Currency hedging decisions are complex, given currencies lack expected returns and can behave unpredictably relative to assets. Hedge ratios vary widely among Nordic investors, influenced by factors such as base currency, asset allocation, interest rate cycles, risk appetite, and regulatory frameworks like Solvency II. Dynamic approaches to hedging, incorporating macro views, are gaining traction.
Investor focus: dynamic allocation and risk management
Norwegian Gjensidige prioritizes managing drawdowns and maintaining portfolio stability to protect insurance liabilities. It employs dynamic tactical asset allocation and remains cautious on newer asset classes like infrastructure due to organizational capabilities and fee considerations. The insurer favors diversification and active risk management in a low interest rate environment.
Industriens Pension on active management and client engagement
Denmark’s Industriens Pension maintains a preference for active management, accepting higher investment costs justified by performance. It emphasizes close, continuous engagement with external managers and allocates substantial resources for travel and meetings to foster understanding and influence, distinguishing itself from peers with less active oversight.
J.P. Morgan Investment Management on industry evolution and client needs
J.P. Morgan’s EMEA head Mike O’Brien describes unprecedented challenges from low bond yields, changing demographics, and regulatory pressures. He highlights a shift toward outcome-focused solutions over traditional building-block investing, increased industry consolidation, margin pressure, and greater emphasis on fiduciary responsibility within the MiFID II framework.
Corporate hospitality in asset management
Client entertainment remains important for relationship building despite regulatory restrictions and industry pressure to limit expenses. Nordic asset managers have transitioned to modest, targeted hospitality typically involving lunches rather than lavish events. Informal settings foster trust and ease communication, but compliance and cost sensitivity can constrain typical practices.
Book recommendations from investors
Ulrik Dan Weuder, head of global direct investments at Denmark’s ATP, favors books challenging conventional thinking and offering deep historical analysis. His recent reads include works on human societal collapse, the American independence period, society successes and failures, and “The Prince” by Machiavelli, emphasizing realism and long-term perspectives.
Personal profile: Timo Viherkenttä, State Pension Fund of Finland
Timo Viherkenttä, CEO of Finland’s State Pension Fund (VER), shares insights on his career, daily routines, and reading interests. He emphasizes long-term thinking, art appreciation, and realistic economic expectations, highlighting his leadership commitment to balancing pension expenditures in a low-return environment.