Issue 5, 2022

The Nordic Fund Selection Journal #05 | 2022 explores several pivotal themes affecting institutional investors in the Nordic region, focusing on investment strategies amidst evolving market and regulatory conditions. A key highlight is the growing emphasis on Paris-alignment of banks, where institutional investors like Varma advocate for selecting counterparties based on their climate action alignment, thereby potentially using business relationships as leverage to promote Paris agreement goals. This strategy contrasts with anti-ESG pressures observed in parts of the US and underscores a push towards responsible investing that integrates a broad value chain perspective, including banks’ fee-generating fossil fuel activities. Meanwhile, Danish pension fund Akademikerpension is revamping its real estate strategy, aiming to grow and diversify its direct domestic property portfolio with heightened ESG considerations amidst regulatory and inflation challenges.

The journal also delves into asset management industry trends, with insights from Onur Erzan of AllianceBernstein highlighting the sector's cyclicality, consolidation, and the blurring lines between traditional and alternative asset managers amidst geopolitical and ESG-politicization risks. Finnish foundations reveal diverse and often adventurous asset allocations; for instance, the Signe and Ane Gyllenberg Foundation has significantly diversified beyond its historical real estate bias, embracing private debt, infrastructure, and forestry, while Sigrid Jusélius Foundation takes on elevated equity risk balanced by substantial cash holdings to maintain liquidity for grants. The role of venture capital is underscored by Sweden’s Saminvest, a state-backed entity nurturing innovative growth companies facing funding challenges, emphasizing the importance of supporting early-stage firms to sustain long-term capital markets and innovation ecosystems. Collectively, the issue offers a comprehensive view of evolving institutional investment strategies amid market volatility, ESG integration complexities, and the need for adaptive portfolio construction.

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Table of content

Editor’s Comment and Market Overview

Discussion on anti-ESG forces in the US and how climate-conscious investors may influence banks by selecting counterparties aligned with the Paris Agreement to promote sustainable finance.

News Analysis: Paris-Alignment of Banks as Business Relationship Dealbreaker

Ulf Erlandsson from Anthropocene Fixed Income Institute highlights using climate criteria to differentiate banks as business partners, applying a worst-in-class approach to avoid banks financing fossil fuels, which could encourage better alignment with climate goals.

Akademikerpension’s Real Estate Strategy Revamp

Danish pension fund Akademikerpension plans to increase its allocation to direct domestic real estate and diversify sector exposures amid regulatory challenges and political risks including rent caps and stranded asset risk, while emphasizing credible ESG implementation.

Perspectives on Asset Management Industry Trends and Challenges

Onur Erzan from AllianceBernstein addresses cyclicality in asset management, the importance of scale and consolidation, growing integration of alternatives, rising geopolitical and ESG politicization risks, and digitalization challenges in institutional investment.

Career Reflections: KLP’s Håvard Gulbrandsen

Insights from Håvard Gulbrandsen on his financial career progress, lessons learnt during market crises, the value of preparation for turbulent times, and focusing on fundamentals amid market noise.

Interview: Folksam Group’s Credit Opportunities and Green Transition Investing

Marcus Blomberg, CIO of Folksam Group, discusses expanding risk budget to increase credit and real asset exposure, ESG integration challenges, maintaining ownership in transition companies like SSAB, and the company’s structure involving partnerships to manage a large portfolio with limited internal resources.

Investor Focus: Sigrid Jusélius Foundation’s Equity-Heavy Balanced by Liquidity

The Finnish foundation’s portfolio features a high allocation to equities with a significant liquidity buffer and unique legacy real estate holding for sentimental reasons; the emphasis is on accepting volatility and maintaining sustainable donations to support medical research.

Investor Focus: Signe and Ane Gyllenberg Foundation’s Diversified Investment Strategy

Despite smaller size, the foundation maintains a diversified portfolio with exposure across equities, real estate, private debt, infrastructure, microfinance, and forestry, balancing legacy allocations with a drive toward broader diversification and dividend-oriented equities.

Roundtable Discussion: Danish Institutional Investors on Asset Allocation Challenges

Industry experts discuss 2022 surprises including inflation and geopolitical shocks, the growing importance of tactical asset allocation, inflation persistence scenarios, European equity evaluation, continued role for alternatives and private credit, political risk in infrastructure investments, and evolving ESG considerations.

Roundtable Discussion: Climate Transition and Net Zero Investing

Participants debate ESG’s evolving role, challenges with definitions and standardization, the importance of engagement over exclusion, regulatory impacts, and balancing financial and sustainability objectives amid shifting market and political landscapes.

In Conversation: Peder Hasslev, CEO of Saminvest

Insights into supporting Sweden’s innovative growth companies via venture capital, bridging institutional capital to early-stage funds, challenges of this asset class, and reflections on facilitating long-term healthy capital markets and company growth ecosystems.

Up-Close & Personal: Christian Backholm, Åbo Akademi University Foundation

Personal career reflections highlight lessons learned about market timing, central banking impact, portfolio risk management, investment challenges, and the holistic role of governance in sustaining endowment performance.

Event: Nordic Fund Selection Forum 2022, Copenhagen

Summary of the inaugural industry event focusing on innovation in fund manager selection, climate change, real assets, active ownership, and emerging market corporates, featuring expert speakers and panel discussions.

Publisher Information and Contact Details

Details about Nordic Fund Selection Journal’s editorial team, publication schedule, distribution, and advertising partners.