Issue 3, 2022

The June/July 2022 issue of Nordic Fund Selection Journal covers key developments and strategic shifts among Nordic institutional investors amid a rapidly evolving investment landscape. AP7, Sweden's largest AP fund managing SEK 970 billion, is preparing to expand allocations to illiquid alternative assets like infrastructure once forthcoming regulatory reforms lift current restrictions. Simultaneously, Apotekets pensionsstiftelse has tactically reduced equity exposure, acquired a CTA fund for inflation protection, and increased allocations to hedge funds leveraging a long-term perspective amid rising interest rates and market uncertainties. However, challenges remain around managing illiquidity thresholds and extended investment horizons.

The issue further highlights emerging sustainability themes, including the integration of biodiversity into investment frameworks through the Biopath research program involving Swedish pension fund AP2 and various academic and financial partners. Meanwhile, Danish private market manager NIO addresses the access gap smaller investors face in alternatives by offering diversified fund products and co-investment opportunities with negotiated fee structures. Realdania, a Danish philanthropic association, advances its mission-related investments targeting energy efficiency and proptech while emphasizing capital preservation alongside equity-like returns and deeper responsible tax engagement, reflecting broader focus shifts within Nordic investors.

Reflecting on geopolitical shocks, East Capital's Chairman Peter Elam Håkansson recounts decades of Russian market investing now disrupted by war and sanctions, underscoring risks tied to country-specific strategies and authoritarian regimes while identifying potential long-term opportunities in Eastern Europe and Ukraine reconstruction. A roundtable with Danish investors emphasizes challenges in the climate transition, including scaling green investments, improving carbon accounting beyond footprints, and navigating complexities in EU taxonomy and ESG regulatory frameworks. Lastly, Nordic consultant Jesper Kirstein discusses trends such as portfolio complexity, the resurgence of hedge funds, tailoring bespoke benchmarks, and balancing extensive ESG exclusions with performance considerations, signaling ongoing evolution in Nordic institutional investment approaches.

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Table of content

Introduction to Key Themes and Updates

Overview of Nordic pension funds’ regulatory changes, new allocations, and emerging investment opportunities including AP7’s shift towards alternatives and the increasing role of sustainable and impact investments.

Strategic Adjustments at Apotekets pensionsstiftelse

Insights into tactical and strategic changes including reduction of equity risk, implementation of put options, addition of CTA funds for inflation protection and diversification in hedge funds, private equity, fixed income, and real assets.

New Approaches to Biodiversity Integration

Description of the Biopath research program and collaborative efforts by Swedish investors, academic institutions, and AI firms to quantify and price biodiversity within financial decision-making and investment analysis.

Access Challenges for Smaller Investors in Alternatives

Discussion by Denmark’s Nordic Investment Opportunities (NIO) on barriers faced by smaller investors in private markets, their strategic responses including fund-of-funds, co-investments, and liquidity management solutions.

Realdania’s Mission-Related Investment Strategy

Exploration of the Danish association’s diversified portfolio aimed at capital preservation and equity-like returns, with a focus on mission-related investments supporting sustainable development and proptech innovation.

Reflections on Russia and Investment Impacts

Perspective from East Capital on the historical and current challenges of investing in Russia, the consequences of the Ukraine war, future outlook, and shifting investment focus towards broader Eastern Europe and emerging markets.

Danish Roundtable on Climate Transition and Net Zero Investing

Summary of discussions among Danish pension funds and asset managers addressing green transition challenges, opportunities in green infrastructure and technologies, ESG data complexities, regulatory frameworks, and transition risk management.

Nordic Investor Trends and Portfolio Complexity

Final Nordic investor survey by Kirstein highlighting growing portfolio complexity, resurgence of hedge funds, adoption of bespoke benchmarks, ESG integration challenges, and recommendations for internal management and resource allocation improvements.

Event Recap: Nordic Fund Selection Forum 2022 – Stockholm

Report on the 15th Nordic Fund Selection Forum featuring geopolitical insights, asset class perspectives, and innovation in tech-powered fund research, attended by institutional investors and fund selectors.

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