Issue 3, 2018

The June/July 2018 issue of Nordic Fund Selection Journal highlights several key themes shaping the Nordic and global investment landscape. A major focus is on the growing adoption of ESG (environmental, social, governance) principles across fixed income and equity portfolios, emphasizing the limitations of solely investing in green bonds and the importance of active engagement and divestment strategies. Sweden’s AP1 pension fund exemplifies this trend by revising its emerging market equity mandate to require ESG integration, while also seeding sustainable passive funds. Other Nordic institutions such as ATP and the Church of Sweden are driving transparency and sustainable alternatives, with ATP pioneering active ownership and innovative tax policies and the Church divesting from hedge funds in favor of impact-aligned investments.

The publication also covers broader industry dynamics including fund selection philosophies, the challenges of short-termism, and the evolving role of active versus passive strategies in a low-yield environment. Notably, AP1 is revamping its hedge fund allocation towards a diverse set of idiosyncratic alternative strategies to improve risk-adjusted returns. Manager selection approaches emphasize deep qualitative assessment and long-term partnerships. Complementing this is a detailed roundtable with Icelandic pension funds, exploring global equity allocations amid capital control liberalizations, valuation concerns, and ESG incorporation. These discussions reinforce the push for diversified, global, ESG-conscious portfolios seeking sustainable alpha amidst regulatory and market uncertainties. Overall, the issue underscores a Nordic investor community progressively integrating sustainability, refining manager selection, and adapting to structural shifts in markets and regulation.

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Table of content

Editorial Comment and Trends in Nordic Fund Selection

Increasing allocation to green bonds among Nordic institutional investors, the growing mainstream acceptance of green fixed income assets, and the challenges of integrating ESG beyond green bonds in fixed income portfolios.

ATP’s CEO Christian Hyldahl Interview and Strategic Outlook

Insights on ATP’s increased openness, ESG integration in portfolio management, a proactive tax policy on private equity and illiquid assets, and its focused approach to ESG active ownership globally. Discussion of the fund’s investment philosophy, portfolio construction, leverage use, and China market opportunity.

AP1’s Emerging Market Equity Strategy and ESG Integration

Review of AP1’s public tender for emerging market equity managers, with integrated ESG requirements. Emphasis on manager-owned ESG integration, challenges in passive ESG strategies, and AP1’s active role in seeding ESG-focused funds and industry engagement.

Industry Insights: Fund Selection Philosophy by Pictet Wealth Management

Fund selector Mussie Kidane shares the importance of qualitative and quantitative analysis, combating industry short-termism, managerial temperament, and best practices in interacting with fund sales professionals.

AP Fund Reform in Sweden: Regulatory Changes and Impact

Overview of the ongoing two-step reform of AP funds investment rules, including reduced fixed income requirements, increased allocations to alternatives, and prospects for approval amid political considerations.

Asset Manager Profile: Lannebo Fonder’s Nordic and International Expansion

Discussion of Lannebo’s growth from a Swedish small cap specialist to international markets, including new fund launches, entry into the Danish market, and plans for Luxembourg fund domiciliation.

Kjetil Houg’s Transition from Oslo Pensjonsforsikring to Folketrygdfondet CEO

Interview highlighting his focus on continuity, investment strategy development, governance, and reflections on differences in alternative asset exposure between his former and new roles.

Spotlight on Nordea Asset Management: Nordic Market Trends

Viewpoints on risk sentiment shifts, fixed income cautiousness, increasing interest in diversification, and emerging markets debt opportunities amid changing macroeconomic conditions.

Global Credit Market Dynamics and Investment Outlook

Analysis of the credit cycle phases, impacts on sectors and regions, inflation expectations, and strategies for managing geopolitical and regulatory risks within credit investing.

ATP CEO Interview: Investment Philosophy and Public Role

Christian Hyldahl discusses transparency enhancements, active ownership initiatives, the use of leverage, China market opportunities, and the responsibilities of managing a major pension fund in the public eye.

Green Fixed Income: Impact and Innovation in Climate Investing

Portfolio manager Ulf Erlandsson on the importance of bond market participation in combating climate change through green bonds, divestment, and short-selling strategies to influence issuer behavior and capital costs.

Investor Focus: AP1’s Hedge Fund Portfolio Revamp

Presentation of AP1’s new “idiosyncratic alternative investments” portfolio replacing traditional hedge fund holdings with a broader range of uncorrelated strategies, including synthetic exposures and internal trend-following overlays.

Peer-to-Peer Book Recommendations: Institutional Investor Perspectives

Selected books on financial market dynamics, history, sustainable investing, political strategy and social history recommended by senior professionals at Ilmarinen and Alecta.

Up-Close and Personal: Claudia Stanghellini, AP3

Career journey from Italy to Sweden, the shift from actuarial analysis to fund selection, current focus on ESG incorporation, and reflections on fund manager evaluation and portfolio evolution.

Investor Focus: Church of Sweden’s Sustainable Investment Journey

Chief Investment Officer Anders Thorendal describes the divestment from hedge funds, building a portfolio with socioeconomic impact, and benefiting from the maturing ESG landscape and increasing availability of impact products.

In Conversation: Peter Hansson’s Tenure at SPK and Retirement Plans

Reflections on SPK’s strategic portfolio overhauls, managing regulatory evolution and complexity, investor-manager relations innovations, and outlook on leisure and consulting following retirement.