Issue 4, 2019

The text presents a comprehensive overview of current trends, challenges, and insights within the Nordic and broader global investment landscape, emphasizing asset management approaches, manager selection, and ESG integration. Emerging markets debt remains attractive despite volatility, with agility and differentiation seen as key in navigating idiosyncratic risks, particularly in countries like Turkey and Argentina. Nordic asset owners continue to grapple with regulatory frameworks impacting direct investments and the integration of alternative assets, while sustainable investment initiatives and climate risk management gain prominence, exemplified by Skandia's climate proofing efforts and evolving EU taxonomy legislation aiming to combat greenwashing.

Furthermore, institutional investor preferences underscore the critical importance of asset managers' reputations over sheer performance metrics, signaling a shift towards valuing organizational culture, ESG competency, and communication capabilities. Selection processes have grown increasingly complex, requiring deeper due diligence including operational, compliance, and cultural assessments. Asset managers are encouraged to maintain client-centric approaches, embracing technological innovation and resource investment to remain competitive. Notably, the discussions highlight the growing emphasis on ESG integration, cautioning against superficial approaches and advocating for genuine, embedded practices to meet evolving standards and investor expectations.

Parallelly, Nordic fund selectors engage in active dialogue around Asian equities, recognizing regional growth potential while navigating inherent risks such as trade disputes and governance challenges. The differentiation between markets like China and India and the increasing role of A-shares in portfolios are acknowledged, with manager selection strategies adapting accordingly. Overall, the content captures the multifaceted nature of asset management today—from macroeconomic influences and regulatory shifts to cultural dynamics and sustainability mandates—providing insights into how investors and managers strive to align strategies with long-term value creation in a complex, evolving environment.

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Table of content

Emerging Market Debt: Agility Matters

Emerging markets have rebounded in 2019, yet valuations remain attractive. Given performance disparities across countries, a differentiated and agile investment approach is essential to optimize risk-adjusted returns. Case studies of Turkey and Argentina illustrate managing volatility through tailored strategies, emphasizing defensive positions in Turkey’s macro-risk environment and opportunistic positioning in Argentina amid political uncertainties.

Direct Investments in Alternative Assets: Challenges and Policy Proposals

The Swedish finance ministry’s proposals limit AP funds’ ability to make direct investments in infrastructure and lending, citing concerns over organizational costs and risk. However, industry experts argue that larger pension funds have successfully built internal teams for such investments, often yielding higher returns and efficiency. The ongoing debate highlights differing views on the role and capabilities of pension funds in alternative asset management.

PFA’s Talent Acquisition and Investment Strategy

PFA’s CEO Allan Polack discusses the creation of a group Chief Investment Officer role to enhance portfolio construction and investment management, culminating in hiring ATP’s Kasper Ahrndt Lorenzen. The investment organization has notably expanded its focus on direct illiquid assets, increasing staff and emphasizing dedicated teams for private investments across equity, credit, and real estate.

Keva’s ESG Integration and Responsible Investment Approach

Kirsi Keskitalo, head of responsible investment at Keva, outlines the Finnish pension fund’s strategic, long-term approach to ESG integration across asset classes. Emphasis is on careful manager selection aligned with Keva’s values, innovation in real estate projects focusing on sustainability, commitment to climate initiatives, and detailed climate risk assessment within a large and diversified portfolio.

The Importance of Asset Manager Reputation

Recent research by Kirstein reveals that Nordic institutional investors prioritize an asset manager’s reputation and organizational capabilities over raw performance or fees when selecting external managers. ESG competencies contribute to reputation but as part of broader organizational strength. Asset managers are encouraged to build trusted partnerships through transparent communication and alignment with investor needs.

Climate-Related Investment Strategies and EU Taxonomy Developments

Investment firms are incorporating climate risk mitigation and adaptation strategies into portfolios via innovative frameworks. The EU’s forthcoming sustainable finance taxonomy aims to define environmentally sustainable economic activities, combating greenwashing and promoting transparency. While welcomed for clarity, concerns remain regarding possible market constraints and the ongoing challenge of balancing regulation with innovation.

Nordic Collaboration and Industry Movements

The Nordic CFA societies unite to organize an inaugural pan-Nordic event focusing on the “Nordic model” in asset management, Asian equities, and responsible investing. Industry personnel movements include senior appointments and leadership changes at Nordic sovereign wealth and pension funds, asset managers, and infrastructure investment companies.

Manager Selection in Emerging Markets and Asia: Insights from Nordic Investors

Around-the-table discussion with Nordic selectors and managers highlights the need to navigate regional inefficiencies, corporate governance challenges, and trade-related risks in Asian equity markets. Approaches to manager selection emphasize understanding cultural nuances, ESG integration authenticity, company fundamentals, capacity constraints, and balancing growth versus value styles amid evolving index compositions.

Institutional Manager Selection Practices and Challenges

Nordea’s head of external products, Anders Bertramsen, underscores the necessity of clear client mandates, collaborative manager visits, and assessment beyond pure performance metrics, including operational due diligence and regulatory compliance. He advocates for thorough ESG integration rather than simplistic third-party screening, warning of reputational risks associated with public search announcements that fail to materialize.

JPMorgan Asset Management’s Perspective: Culture, Technology, and Liquidity Risk

Patrick Thomson, CEO for EMEA at JPMorgan Asset Management, highlights the critical role of company culture, organizational resources, and technology investment in assessing asset managers. He underscores evolving client needs for digital engagement and the importance of robust liquidity risk frameworks. ESG integration and regulatory developments in sustainable finance are central themes shaping manager and product selections.

Profiles and Personal Insights: Gustaf Rentzhog, Söderberg & Partners

Gustaf Rentzhog, CEO of Söderberg & Partners, shares his entrepreneurial journey, company growth, and strategic acquisitions. He reflects on industry challenges, ongoing organizational evolution, and personal interests, emphasizing company culture, adaptability, and client-centric innovation as key drivers.

Editorial and Event Information

Details about the Nordic Fund Selection Journal including contacts, publishing information, upcoming issues focused on private equity and ESG in fixed income, and announcements for Nordic industry events such as the Nordic Fund Selection Awards and roundtables on ESG integration and ETF trends.