Issue 5, 2017

The October-November 2017 issue of Nordic Fund Selection Journal highlights several key developments across Nordic and international asset management. It covers regulatory shifts, including concerns from the Swedish regulator that MiFID II may not sufficiently protect investors and could lead to further reforms. Discussions of pension funds such as Denmark’s LD highlight institutional responses to regulatory changes, while Danish initiatives promote Copenhagen as a post-Brexit financial hub competing with other European cities. Notably, the journal examines how major Nordic pension funds like AP Pension embrace more proactive, integrated carbon and ESG strategies, moving beyond traditional carbon footprint analyses toward positive impact investments.

In asset management trends, the magazine delves into the rise of liquid alternatives via onshore UCITS vehicles versus traditional offshore hedge funds, discussing benefits and limitations of each format. It explores emerging market equity investing, including insights from GSAM on the challenges of investing in complex, diverse markets such as China amid index changes. Key interviews and profiles showcase Nordic asset owners’ strategic evolutions—e.g., Sweden's Alecta appointing a new CIO emphasizing active management in a low-yield environment, and Finnish Elo expanding sustainable investment efforts with a comprehensive ESG framework. The issue also covers institutional real asset expansion despite valuation challenges, as exemplified by ATP’s continued investments in domestic and foreign real estate and infrastructure.

Overall, the journal presents a snapshot of Nordic institutional investors navigating a changing regulatory, economic, and sustainability landscape through innovative portfolio management, enhanced ESG integration, and active factor-based investment approaches. Emphasis is placed on adaptability to market uncertainties, diligent manager selection, and engagement with sustainability metrics to achieve long-term, responsible growth.

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Table of content

Subscription Model and Industry Changes

Nordic Fund Selection Journal will introduce a new subscription model from January 2018. Institutional investors and Nordic fund selectors will continue to receive the magazine for free. Those in asset sales and fund companies will require a subscription, which also includes access to a Nordic news service.

Regulatory Environment and Mifid II

Swedish regulator Finansinspektionen warns that Mifid II may not be sufficient to curb harmful retrocessions and enforce suitable product advice. The new rules impact fund companies and distributors, emphasizing transparency, corporate culture change, and risks around retrocessions.

Danish Pension Fund LD and the Holiday Fund

Danish pension fund LD is proposed to manage the new Holiday Fund, created due to changes in Danish holiday savings law. The fund is expected to manage at least DKK 10 billion with a potentially more high-risk and illiquid investment strategy, increasing LD’s asset management role and lifespan.

Copenhagen’s Post-Brexit Financial Hub Initiative

Copenhagen is actively promoting itself as an attractive post-Brexit financial industry hub, appealing especially to asset managers and fintech companies, emphasizing reduced taxation and lower regulation. It faces competition from cities like Frankfurt, Paris, Luxembourg, Dublin, and Stockholm.

Ilmarinen-Etera Merger and Leadership Changes

Finnish pension companies Ilmarinen and Etera are merging with CEO changes imminent as current Ilmarinen CEO Timo Ritakallio moves to OP Financial Group. The merged entity plans operational efficiencies and organizational restructuring.

Kirstein’s Business Division and Conflicts of Interest

Copenhagen-based Kirstein has split into two entities: advisory services for asset managers and a new investment management firm, Spektrum, targeting institutional investors. This division aims to better manage potential conflicts of interest and clarify client services. Spektrum plans measured growth with a focus on alternatives.

Emerging Market Equities: Manager Insights

Dialogue with GSAM’s Luke Barrs highlights the complexities of emerging market equities, advocating active management to navigate less efficient markets, factor and country risks, and the opportunities presented by China’s A-shares inclusion to indices. Active strategies aim to mitigate benchmark concentration risks.

Liquid Alternatives: Offshore and Onshore Perspectives

The growth of liquid alternative investment products, including Ucits-compliant hedge fund strategies, offers investors diversification benefits. While Ucits formats increase accessibility and liquidity, they may constrain certain hedge fund strategies. Market participants weigh performance, cost, and liquidity trade-offs between offshore and onshore alternatives.

ATP’s Real Asset Expansion and Market Challenges

Denmark’s ATP pension fund steadily increases real assets including infrastructure and property, both domestically and internationally. ATP acknowledges intense competition and elevated valuations in the real asset space, relying on partnerships and selective direct investments to fulfill its long-term investment strategy.

ESG and Carbon Strategy Enhancements at Elo

Finnish pension fund Elo advances its ESG initiatives by expanding beyond traditional carbon footprint methods to include scope three emissions and positive impact investments. Elo commits to doubling impact investments by 2025 and promotes greater corporate transparency and sustainable practices.

Profiles and Perspectives from the Nordic Asset Management Sphere

Interviews and profiles of Nordic industry professionals reveal insights on managing medium-sized portfolios, embracing technological and strategic innovation, and adapting to evolving market and regulatory environments.