Issue 6, 2016

This document features extensive coverage of Nordic asset management and pension funds' approaches to current financial challenges, investment strategies, and regulatory impacts during late 2016 and early 2017. It highlights Danish pension fund PBU's strict no-gift policy to eliminate conflicts of interest, as well as the ongoing debate in Norway about increasing equity allocation in the Government Pension Fund Global amid concerns about risk and volatility. The report details Carnegie Asset Management’s rebranding and expansion efforts, Swedish pension funds' resistance to tough new capital requirements, and Denmark’s launch of a new agriculture fund to support local farmers, underscoring themes of transparency, sustainability, and innovative asset allocation.

The text further explores Nordic investors’ increasing interest in low carbon strategies, with Swedish AP4 pioneering methodologies to reduce climate risk in portfolios, alongside active and passive approaches to integrate ESG factors and big data analytics. The growing use of systematic and quantitative investing, including in emerging markets, is presented as a key trend, supported by Nordic pension funds’ moves toward internal management and diversified strategies. Additional elements include discussions on challenges in fund due diligence processes, regulatory burdens on Swedish insurance and occupational pension funds, and evolving hedge fund industry dynamics, particularly in fee structures and investor relations, reflecting wider market shifts and institutional investor demands across the Nordic region.

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Table of content

Introduction and Industry Practices

Overview of Nordic pension funds’ policies on gifts and hospitality, with an emphasis on transparency and integrity in asset management relationships. Discussion on recent stricter regulations and their implications within the Nordic asset management industry.

Asset Allocation in Norwegian Sovereign Wealth Fund

Analysis of expert committee recommendations to increase equity exposure from 60% to 70% while considering risk, volatility, and political adaptation. Debate on the balance between risk-taking and stability in public finances, including viewpoints from Norges Bank Investment Management and former finance officials.

Danish Asset Management Branding and Expansion

Carnegie Asset Management’s decision to change its name to C WorldWide Asset Management to better reflect its global focus and clarify brand identity. The company’s growth strategy, including new client acquisitions and plans to enter the US market.

Regulatory Challenges for Nordic Pension Funds

Criticism against Swedish financial supervisory proposals imposing stringent capital requirements and “traffic light” stress tests that may limit pension funds’ risk-taking ability. Examination of potential market impacts and calls for reconsideration of the new regulatory framework.

Danish Pension Investment in Agriculture

A new government-backed agriculture fund offers subordinated loans to Danish farmers, supported by institutional investors including ATP, PensionDanmark, and PKA. Despite Denmark’s large export industry, challenges remain in finding suitable agricultural investment opportunities with acceptable risk-return profiles.

Fund Monitoring and Watch List Practices

Insight into Swedish fund selectors’ use of watch lists to monitor underperforming funds or changes such as ESG integration issues, fund manager turnover, and mergers. Emphasis on communication with asset managers and continuous evaluation of fund performance and qualitative factors.

Launch of First Nordic Social Impact Bond in Finland

Introduction of a EUR 15 million social impact bond aimed at improving employment among refugees. Details on project financing, expected returns, partnership with Finnish retail cooperative S-Group, and the fund manager’s future plans for social impact bond issuances focused on youth preventive measures.

Interview with DNB Liv’s CFO Truls Tollefsen

Discussion on balancing low interest rates, Solvency II regulation, and guarantee obligations in Norwegian life and pension management. DNB Liv’s strategy to shift from real estate to property loans, build a mortgage loan portfolio, and manage hold-to-maturity bonds. Perspectives on systemic risks and interest rate scenarios following global and US political developments.

Standardisation and Digitisation of Due Diligence

Overview of Door, a collaborative digital platform by APFI to standardize and streamline due diligence for fund selectors and asset managers. Objectives include reducing inefficiencies in RFPs and improving transparency and communication within the Nordic and global fund industry.

Low Carbon Investment Strategies

Presentation of approaches to design low carbon equity portfolios that reduce carbon footprints while managing tracking error and benchmark risk. Discussion on methodological developments, sector constraints, potential enhancements, and collaboration between Nordic pension funds on carbon data transparency.

Active Low Carbon Investment and Product Innovation

Examples of new active equity funds incorporating low carbon components combined with low volatility or quant strategies. Market demand trends, integration of carbon reduction with existing strategies, and challenges relating to sector neutrality and future emission forecasts.

Emerging Market Equities: Quantitative and Big Data Approaches

Analysis of Nordic institutional investors’ preferences for quantitative models versus fundamental managers in emerging markets. The use of big data and alternative datasets, including natural language processing and sentiment analysis, to generate alpha in emerging markets. Views on opportunities and challenges of quantitative investing in these markets.

Investor Focus: Turku University Foundation’s Real Estate Strategy

Profile of Finnish foundation’s real estate portfolio emphasizing culturally significant and long-term assets. Highlights include properties with historical importance, such as lighthouses and renovated city landmarks, with an emphasis on diversification, liquidity, and steady income generation.

Investor Shifts and Regulatory Pressures at SH Pension

Review of SH Pension’s strategy to exit long-duration bonds and hedge funds, moving toward liquid absolute return strategies and private equity. Challenges include regulatory reporting burdens from Solvency II and Swedish occupational pension rules, along with the impact of capital requirements on product viability.

Hedge Fund Industry Challenges and Adaptations

Interview with AIMA CEO Jack Inglis on hedge fund underperformance, evolving fee structures moving beyond the traditional 2:20 model, investor expectations, regulatory impacts including Brexit and AIFMD, and the continuing value of hedge funds within diversified portfolios.

On the Move: Industry Leadership Changes

Updates on key appointments and departures within Nordic asset management, including new CEOs at ATP, Skagen Funds, Apotekets Pensionsstiftelse, and recruitment trends favoring managerial experience across asset management and pension sectors.

Up-Close and Personal

Profile of Kenneth Winther, Head of the free (return-seeking) investment portfolio at Tryg Insurance, covering career background, investment philosophy focused on diversification and dynamic asset allocation, and personal interests balancing career challenges.

News and Industry Updates

Roundups of recent tender announcements, fund selection improvements, strategic reviews, and manager reshuffles across the Nordic region, reflecting evolving investor needs and market conditions.

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