NORDIC HEDGE FUND INDUSTRY REPORT 2018 - HEDGENORDIC
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Promotion. For Investment Professionals Only. Not for public Distribution
The Nordic Hedge Fund
Universe at a Glance
Movers & Shakers in the Nordics
What makes a good
Hedge Fund?
In Focus: Multi Managers
A dying breed or at the brink of
comeback?
Nordic Hedge Fund
Industry Report - 2018
Contents
www.hedgenordic.com - March 2018 www.hedgenordic.com - March 2018
Promotion. For Investment Professionals Only. Not for public Distribution
INTRODUCTION
HedgeNordic is the leading media
covering the Nordic alternative
In Focus: Multi Manager Funds / Fund of Hedge Funds Is it a bird, is it a New nordic Hedge Fund launches: Evira, Nordic Cross, investment and hedge fund universe.
The website brings daily news, research,
plane... No, it´s VISIO CABA Capital, Adrigo Nordic Small & Midcap L/S
analysis and background that is relevant
to Nordic hedge fund professionals from
the sell and buy side from all tiers.
• Funds of Hedge Funds in HedgeNordic publishes monthly,
Metamorphosis quarterly and annual reports on recent
developments in her core market as well
• The building blocks of
as special, indepth reports on “hot topics”.
good Fund of Hedge Funds
• “We always expect to be HedgeNordic also calculates and
wrong...” publishes the Nordic Hedge Index (NHX)
and is host to the Nordic Hedge Award
• An Iconoclastic Fund and organizes round tables and seminars.
of Funds mentality
56-71 42-55
NordSIP is a leading news website
focused on Sustainable Investment
22
viewed from the Nordics.
The site brings together institutional
investors, fund managers and third party
Nordic Real Estate - Formue....Who? PPM - Reform Are institutions flexible What Makes a good hedge service providers concerned with ESG.
As Local As it Gets enough for real fund? News, opinions, interviews and analysis
diversification? are provided are showcased on a daily
basis.
Contact:
35 38 28 25 14 Nordic Business Media AB
BOX 7285
SE-103 89 Stockholm, Sweden
Corporate Number: 556838-6170
How Nordic VAT Number: SE-556838617001
Pension Funds
5 28 46 66
The Editor – PPM Reform- Nordic Cross in Multiple “We always expect to be wrong
Invest in Equity A Tough Year for Nordic Hedge Funds The Swedish Premium Pension System Hedge Fund Launch going into every trade!” Direct: +46 (0) 8 5333 8688
Mobile: +46 (0) 706566688
6 32 50 69
The Nordic Hedge Fund A Risk Parity Approach to A Danish bank’s edge An Iconoclastic Fund email: kamran@hedgenordic.com
Space at a glance - a review Systematic Macro transitioned to a Hedge Fund of Funds mentality
www.hedgenordic.com
14 35 54 72
Real Estate in the Nordics: New Launch: Putting Nordic NHX Asset Growth Index - AuM
What Makes a Good Hedge Fund?
as local as it can be Small & Mid Caps to work in the Nordic Hedge Fund Space
Picture Index: G. K.---shutterstock.com, Ollyy---
shutterstock.com, Syaheir Azizan--- shutterstock.com,
18 38 56 76
Change and Continuity: How Nordic Formue…who? A Great Dane you In Focus: Fund of Hedge Funds Family Offices and Ase---shutterstock.com, ©-flyfisher---Fotolia.com,
Pension Funds Invest in Equity may not have on your Radar….yet Multi Manager Funds Hedge Funds: A Shared DNA? isak55---shutterstock.com, Khakimullin Aleksandr--
-shutterstock.com, kudla---shutterstock.com, lynea-
--shutterstock.com, Michal Durinik---shutterstock.
22 42 58
Is it a bird, is it a plane...? Nordic New Launches Funds of Hedge Funds in com, MorganStudio---shutterstock.com, Polarpx---
shutterstock. com, Romolo-Tavani---shutterstock.com,
No, It´s Visio! Keep ´em coming! Metamorphosis Michal Durinik---shutterstock.com, Tom Wang---
shutterstock.com, Romolo Tavani---shutterstock.
25 43 62
com, somchaij---shutterstock.com, Stefano
Are institutions flexible enough Nykredit launches leveraged The building blocks of
18
Buttafoco---shutterstock.com, graf---shutterstock.
for real diversification? corporate credit strategy good Fund of Hedge Funds com. Tashatuvango---shutterstock.com, Tom Wang---
shutterstock.com, totojang1977---shutterstock.com,
designer491---shutterstock.com
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www.hedgenordic.com - March 2018
The Editor...
A tough year for Nordic Hedge Funds
After years of steady traffic on global financial markets, On the first pages of the report, we made an effort to dis-
winds of change may have caught up with us towards the sect to the Nordic hedge fund space and present data,
end of last year, continuing into the new year. The spike numbers, some facts and fiction we hoped you´d find
in inflation in early February that sent shivers through relevant. This edition of the Nordic hedge fund indus-
markets may be the first bad breath hint to the kiss of try report will look into what institutional investors (and
death for the Goldilocks years, and a wake-up call to a jury members to the Nordic Hedge Award) consider to be
new normal. some characteristics of a good hedge fund, and investigate
if hedge funds and family offices are distant cousins, and
With the early possible early signs of inflation creeping up carry some of the same DNA. The report also looks at how
(maybe by 2019?), American threats of protectionism and how Nordic pension funds invest in equities and what role
a possible global trade war there is plenty to look out for. ESG plays in that.
The EU itself is still digesting the Brexit vote, and everyone
is still trying to understand what We are introducing three new
this confluence of events could launches that come with very
mean. “Is there different prefixes: Danish CABA
Facts & Figures on the Nordic Hedge Index (NHX) Capital, alongside a fellow Danish
With market uncertainties and ge- still room for team, this one the award winning
opolitical sabre-rattling all around
us. The question is whether there optimism?” fixed income team of Nykredit,
who are sending their new fund,
3.21
is still room for optimism. At a re- Evira, to the races.
cent conference I attended, the AIF in Amsterdam in early
March, a speaker was asked to list the “most important With Adrigo Small & Midcap L/S one of Sweden’s oldest
upside risks for 2018/2019” (I was late pulling out my pen managers launched its first fund, since its flagship set sail
Average Sharpe Ratio of NHX Fixed Income Constituent but it went something like this): in 2006, and finally Nordic Cross who set out not to launch
a new fund, but an entire boutique with a range of funds.
77%
“A pick up in productivity growth, fiscal stimulus and in- We introduce a new series in this report with a segment of
creased government spending in Europe, Trump getting the hedge fund industry “in focus” and have selected fund
some things right, and improvements in policy in the EU of hedge funds under the microscope.
region.”
Ratio of NHX constituents with positive We spoke to many interesting managers for this publica-
returns in 2017 The Nordic Hedge Index (NHX) had a tough 2017, es- tion from across the Nordics and discussed their strategies
pecially compared with its international peers. The NHX and views on markets and the world, on risk, on risk ap-
118,8%
subcategory that finished the year weakest were CTAs, petite and much more, as we share on the following pages.
who consequently also started weakest into the first
quarter of 2018. The CTA space will find it harder and
harder to prove their case of not being a one-hit-in-a-
Highest cummulative return of any NHX sub Kamran G. Ghalitschi
decade wonder, too. 2017 surely was a disappointment,
CEO / Publisher HedgeNordic
category since index inception (2005): NHX CTA and the hefty kick where it hurt in February of this year
was not encouraging.
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www.hedgenordic.com - March 2018 www.hedgenordic.com - March 2018
by Eugeniu Guzun– HedgeNordic
The Nordic Hedge Index, hereafter the NHX generated a cumulative return of 89.0 percent
Composite, tracks the performance of the Nordic since the beginning of 2005, which compares
hedge fund industry since the beginning of 2005. with the returns of 86.5 percent and 102.1
Despite lagging international peers in the past percent produced by the HFRI Fund Weighted
couple of years, Nordic hedge funds have broadly Composite Index and the Barclay Hedge Fund
performed in line with their global counterparts Index, respectively.
over the past 13 years. The NHX Composite has
Performance Comparison Between NHX Composite and Benchmarks
NHX Composite versus Benchmarks
102,1%
86,5%
Since 2005
89,0%
45,0%
6 years 35,4%
35,2%
20,6%
4 years 16,7%
18,1%
17,1%
2 years 14,6%
6,9%
10,4%
1 year 8,6%
2,9%
5,8%
6 months 4,9%
1,6%
The Nordic hedge fund 3 months
3,0%
2,6%
0,7%
Space at a glance - a review
-0,03 0,17 0,37 0,57 0,77 0,97
Barclay Hedge Fund Index HFRI Fund Weighted Composite NHX Composite
Source: HedgeNordic, BarclayHedge, and Hedge Fund Research.
However, the realized volatility of the NHX at 3.8 percent, which compares favourably with
Composite on an annualized basis is significantly the volatility of 5.8 percent and 6.8 percent for
lower than that of the international indices. The the HFRI Fund Weighted Composite Index and
annualized volatility of the NHX Composite stands the Barclay Hedge Fund Index, respectively.
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Performance Comparison Between NHX Composite and Benchmarks (Adjusted to 5% Annualized Volatility) Fixed-income hedge funds collectively formed the best- funds in the subsequent year with an average gain of 4.5
performing NHX sub-category in the past two years, after percent. The graph below shows the performance achieved
gaining 7.2 percent in 2017 and 8.1 percent in 2016. by each of the five NHX sub-categories in each of the past
240,00 45,00% Equity-focused hedge funds gained the most among three years.
Nordic hedge funds in 2015 and trailed only fixed-income
40,00%
220,00
Performance Comparison Between NHX Sub-Categories, 2015-2017
35,00%
200,00
-4,0 -2,0 0,0 2,0 4,0 6,0 8,0 10,0 12,0
30,00% 3,0
NHX Composite 3,8
180,00 4,8
-2,4
25,00% NHX CTA 4,1
-0,2
160,00 3,8
2017
NHX Equi>es 4,5
20,00% 9,9 2016
7,2
140,00 NHX Fixed Income 8,1 2015
1,6
15,00%
4,3
NHX Mul>-Strategy 3,2
120,00 3,6
10,00% 0,2
NHX Fund Of Funds -0,8
2,3
100,00
5,00%
Source: HedgeNordic
80,00 0,00%
Despite their recent underperformance, CTAs produced CTAs, by a wide margin in the past six years. Equity
Ju 005
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Se 006
De 007
Oc 013
ar 3
Ap 005
ay 7
Oc 008
ar 8
Au 009
Ja 009
Se 011
Ju 015
v2 5
Se 016
De 017
Fe 006
Ju 07
Fe 011
Ap 015
7
Fe 016
Ju 17
Ap 010
v2 0
Ja 014
Ju 010
ay 2
De 012
Ju 12
Au 014
No 00
M 200
M 00
M 01
No 01
01
No 01
M 201
20
20
20
2
2
r2
r2
2
l2
2
t2
2
g2
r2
2
2
t2
2
2
2
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2
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2
l2
2
n
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b
c
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c
b
the highest return on average since 2005, delivering hedge funds generated cumulative gains of 50.4
Ja
NHX Overperformance Barclay NHX Overperformance Barclay NHX Composite a cumulative return of 118.8 percent. On the other percent since the beginning of 2012 through the end
HFRI Fund Weighted Composite Barclay Hedge Fund Index
hand, equity-focused and fixed-income hedge funds of 2017, while fixed-income strategies returned a
outperformed the remaining fund categories, including cumulative 50.8 percent over the same time period.
Source: HedgeNordic, BarclayHedge, and Hedge Fund Research.
Performance Comparison Between NHX Sub-Categories, Cumulative Returns
When adjusting for the level of volatility, Nordic hedge Nordic Hedge Fund (NHX) Index Strategy Performance NHX Sub-categories
funds outperform their international peers by a wide margin. Breakdown
Since 2005, the outperformance of the NHX Composite 115%
compared to the HFRI and Barclay indices accumulated to
95%
more than 30 percent, when the performance of all three
NHX Fund of
indices is scaled to 5% volatility, which appears clearly in Funds, 23
NHX CTA, 21
75%
the graph above.
55%
Historically, the NHX Composite has included a large
number of equity strategies. Equity-focused hedge funds NHX Multi-
Strategy, 33 35%
account for slightly more than one-third of the overall NHX NHX
universe, with a total of 57 members. The NHX family also Equities, 57
15%
contains 21 CTAs, 23 funds of funds, 24 fixed-income
funds, and 33 multi-strategy funds. NHX Fixed -5% 6 months 1 year 2 years 4 years 6 years
Income, 24
Since 2005
NHX Composite NHX CTA NHX Equities NHX Fixed Income NHX Multi-Strategy NHX Fund Of Funds
Source: HedgeNordic Source: HedgeNordic
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Despite the long-term dominance of CTAs in aggregate Invest IS, and Taiga Fund, and one CTA (i.e. Alfa Sigma Return Distribution of NHX Constituents in 2017
since 2005, those dominating the list of best-performing Opportunities) generated an average compounded return
NHX member hedge funds were equity strategies. Five of more than 15 percent, of which the healthcare-focused Return distribu,on of NHX members in 2017
equity hedge funds, namely Rhenman Healthcare Equity fund managed by Rhenman & Partners Asset Management
35
L/S, HCP Focus Fund, Borea Global Equities, Mjeltevik produced a compounded return in excess of 20 percent.
2% ~ 4%
30
Average Compounded Returns and Percentage of Positive Months for NHX
0% ~ 2%
Constituents
25
6% ~ 8%
100
20
-2% ~ -4%
0% ~ -2%
8% ~ 10%
-4% ~ -6%
90
4% ~ 6%
-6% ~ -8%
15
10% ~ 12%
80
PERCENTAGE OF POSITIVE MONTHS
10
12% ~ 14%
-12% ~ -14%
70
14% ~ 16%
18% ~ 20%
-36% ~ -38%
-28% ~ -30%
-10% ~ -12%
20% ~ 22%
22% ~ 24%
34% ~ 36%
-8% ~ -10%
5
60
0
50
Source: HedgeNordic
40
30
Focusing on the 2017 performance alone, most hedge last year. Two existing NHX members, namely Gramont
funds within the NHX Composite returned between 2 and Equity Opportunities Fund and Estlander & Partners Alpha
-10 -5
20
0 5 10 15 20 25
4 percent for the year. A total of 23 hedge funds returned Trend II – Class P, lost more than 28 percent in 2017, while
AVERAGE COMPOUNDED RETURN between 0 and 2 percent last year, whereas 19 funds Rhenman Healthcare Equity L/S gained in excess of 34
NHX Equities NHX Fixed Income NHX Fund of funds NHX CTA NHX Multi-Strategy
posted an average gain in the range of 6 to 8 percent. The percent.
Nordic hedge fund industry also observed some outliers
Source: HedgeNordic
Conversely, only one CTA currently included in the NHX On a positive note, Nordic fixed-income hedge funds,
generated an average compounded return of more than as shown by the same graph, generate attractive returns
10 percent. The construction of the NHX Composite on average, while keeping their returns positive most of
minimizes the effects of survivorship bias by reflecting the time. A total number of seven fixed-income funds
the performance of already-defunct funds. Therefore, generated average compounded returns of more than
the outperformance of CTAs against the remaining sub- 10 percent. The majority of fixed-income funds generate
categories stems from the outstanding performance of positive returns in more than 70 percent of all months.
several CTA funds that, like shooting stars, shone brightly
before disappearing. These funds no longer operate and
have thus disappeared from the NHX.
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Biggest percentage gainers by NHX NHX Key Facts at a Glance
sub-category and country. Figures and data below are drawn from the HedgeNordic databses
covering the constituents of the Nordic Hedge Index.
Finland
Equities and Sweden
34.5% 21.0% Average sharpe ratios by
NHX sub-category
Performance fees charged by
Nordic hedge funds
Country Breakdown
HCP Focus Fund
180
Rhenman Healthcare
160
3,5 158
3,21 100 18
140
Equity L/S
3 87
23
Average Sharpe ratios for 2017
80 120
2,5 16
Frequency
100
2 60 97
80
1,5 40
60
1
0,90 17
0,73 20 10 40
6 3
0,45 0
0,5 20
0,05 0
Nor way
0 0
5%
8%
4%
0%
e
2%
or
NHX CTA NHX Fixed NHX Multi- NHX Fund Sweden Norway Denmark Finland Total
-1
-1
-2
-3
M
-1
%
%
%
%
0%
NHX Equities Income Strategy of funds
12
15
21
27
CTAs
19.3% 12.6%
Hedge Fund Launches Portion of Fund Gainers Largest Fund by AuM
Borea Global Equities
18
Alfa Sigma 16
Brummer
Opportunities
77% Multi-Strategy
13
11 11
10 10
8
7 7
6
38.0 Billion SEK ~ 4.6 Billion
USD
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Based on 2017 performance As of December 29, 2017
Fund of
Funds
Hedge fund
2017 Launches Management fees charged by
6.4%
Fixed Income performance by country Nordic hedge funds
and Denmark - Volt Diversified Alpha Fund
- IAM Nordic Multi Strategy Fund 60
54
Brummer
18.1%
- CABA Hedge 50
Multi-Strategy Multi-Strategy - Nordic Cross Total Return Bond Fund
40
41
Frequency
- Nordic Cross Stable Return
15.2%
30
- Nykredit EVIRA Hedge Fund
Nykredit MIRA - Asgard Fixed Income Risk Premia 20 16
8
- Adrigo Small & Midcap L/S 10
3
Formuepleje Penta
1
- Evli Factor Premia 0
- Nordic Cross Small Cap Edge -1
%
-1
.5
%
-2
%
-2
.5
%
-3
%
M
or
e
0% 5% 5%
1% 1. 2% 2.
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T
by Aline Reichenberg Gustafsson, CFA - HedgeNordic
he Nordic Hedge Award has been recognising the other hedge funds in the portfolio, as well as the portfolio
best Nordic hedge fund managers every year since as a whole for example. In general, we want our holdings to
2012. After a quantitative screening finds the complement one another in terms of investment strategy,
nominees in each category, a jury composed of Nordic approach and performance and risk patterns and so forth.”
institutional investors determines the winner. The jury’s
selection criteria go beyond numbers, by taking into Numbers are evidently paramount in any manager selection
account other elements that investors typically consider, process, but for both Stanghellini and Hallén, there is
such as reputation or fund organisation. We have asked more to it than a mere quantitative screening. “There isn’t
two of this year’s Nordic Hedge Award jury members a single most important factor,” starts Hallén. “They all
to share their personal view on what they look at when need to make sense, and we need to acquire a conviction
making an investment decision in a hedge fund. Claudia in the management process, as well as the organisation
Stanghellini, Head of external management at Swedish behind the fund. The most important is the quality and the
National pension fund AP3, and Malin Hallén, Senior experience of the team. Once we have assessed that, the
Portfolio Manager, Manager Selection at Swedbank rest is more likely to follow.”
Robur, have accepted to answer our questions.
When considering a hedge fund, the first question is how “In general, we want our holdings
the strategy fits within the firm’s broader asset allocation. to complement one another in
For example, AP3 excludes directional managers from its
hedge fund allocation. “We don’t want to pay for beta at
terms of investment strategy,
hedge fund prices,” justifies Stanghellini. “Hedge funds approach and performance and
should not correlate with the equity market to be part of
risk patterns and so forth.”
our absolute-return bucket.” In addition to external hedge
funds, AP3 also includes its internal alpha strategies, which
are in-house long/short hedge fund mandates, as well as At AP3, Stanghellini reminds us, the “4Ps” are a guiding
risk-premia strategies, in the absolute-return section of principle. “ People, Process, Performance and Protection,
its overall portfolio. “Some people assign risk premia to these are the first things we consider. Practically, we like to
the beta allocation of their portfolio, but we don’t. But it see at least three years of track record, because we want
depends on what type of risk premia you choose and we try to see how the managers handle drawdowns and risk.
also to build a risk-premia portfolio which is uncorrelated They must show that they have control of their portfolio in
to the market. Currently, we have more risk allocated to a stressed market. We don’t look for the next hedge fund
these strategies than to hedge funds, as we are looking to stars who will produce 50 percent performance in one
What Makes a
harvest risk premia in the long-term.” year with painful drawdowns when markets move against
them. We want to have a fund with stable performance,
that is mostly alpha. Our managers must have the ability to
“We don’t want to pay for beta at deliver on target given their mandate. Cost is an important
consideration in our overall portfolio strategy, and a hedge
hedge fund prices.” fund’s fee structure must be in line with our means.” In
Good Hedge Fund
addition to the actual selection criteria, AP3 also looks
At Swedbank Robur, portfolio construction is, of course, for a long-term strategic partnership with its hedge fund
crucial, explains Hallén. “It is a mix of art and science,” she managers, Stanghellini reveals. “We select skilled managers
says. “Our hedge fund allocation is primarily included to in niche markets. At the same time, we want to grow our
add diversification but also value to our traditional asset capabilities internally and look for managers that are open
classes. Our view of the market will determine how much to share and discuss research, investment ideas and market
we allocate to each bucket. The hedge fund portion of the views with us. We like knowledge sharing.”
portfolio has to fit with what the rest of the portfolio looks
Market Neutral and Volatility Strategies Under the Spotlight like.” Currently, the hedge fund selection consists mostly
of absolute return strategies such as equity market neutral
Hallén mentions a new consideration in her selection
process. “This may not be the most important criteria right
and trend following strategies. “Within a strategy, the now, but it has become more prominent in our manager
weights of the different funds are adjusted depending on selection process. We have added sustainability to our
our conviction, and on the correlation, they have with the due diligence process a couple of years ago. It is a factor
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we take into consideration. We favour managers that Concretely, Stanghellini and Hallén are looking for hedge “We have added sustainability Both Hallén and Stanghellini believe in long-term
have signed the PRI and incorporate those principles on fund strategies that complement their firm’s portfolio, commitments once they have invested with any given
a day-to-day basis. We are aware that it is easier for some and therefore they need to be de-correlated from to our due diligence process a manager, provided things pan out as expected of course.
strategies, such as equity long/short, than for others like traditional asset classes. “We don’t cover all the styles,” couple of years ago. It is a factor “Our holding time is long-term if the manager is on target,”
trend followers. Hedge funds have started incorporating says Stanghellini. “We have selected some strategies, such says Stanghellini. “We target high single digits for volatility
sustainable investing practices across the board; the as global macro and CTA, niche long/short structured
we take into consideration.” around or over 10 percent, and a Sharpe ratio of at least
change is happening as we speak, and we are happy to credit, or even emerging market hedge funds. We try to 0.7 for each of the funds.”
see that.” find strategies that fit into the wider allocation, and that downturn. This type of market is notoriously difficult to
we cannot manage internally because we don’t have the navigate, especially for CTAs and trend followers. There Swedbank Robur has gradually integrated hedge funds into
expertise or the scale.” Stanghellini concurs with Hallén’s is one fund however which distinguished itself during its portfolio since 2012. “We have not exited that many
“We want to grow our capabilities view. the recent turmoil, a Nordic shorter-term trend following of our investments, to be honest,” says Hallén. “In some
internally and look for managers strategy, Estlander & Partners Freedom. All our CTA cases, we did, because the fund didn’t fit into our portfolio
“In strong beta markets,” Stanghellini continues, “interesting positions had negative performance during the turmoil, construction, or because we saw better opportunities
that are open to share and discuss
managers are those that are more market neutral. Volatility but this one was down less than one percent. Among our elsewhere. Our shortest holding period was one year; the
research, investment ideas and strategies are also interesting, even though they are getting market-neutral positions, on average the performance fund didn’t live up to our expectations, but there were
market views with us. We like crowded perhaps. It is still a niche space.” At Swedbank, was slightly negative, but a bright spot was Pictet Asset several other factors at play. It was an exception.”
volatility strategies have also been part of the portfolio. Management’s Agora fund. It has managed to deliver a
knowledge sharing.” “Our long volatility position paid off in the recent market consistently positive return, even in choppy markets.”
Claudia Stanghellini, Malin Hallén,
Head of External Management - AP3 Sr. Portfolio Manager. Asset Allocation –
Swedbank Robur
Claudia has 22 years of experience in finance, of which 16
at AP3. After obtaining a MSc in Actuarial Sciences at City Malin Hallén is a Senior Portfolio Manager within the
University in London, she joined Sun Life Financial as an Asset Allocation team at Swedbank Robur. She is currently
Actuarial Analyst for 5 years. managing a range of primarily multi-asset funds, investing
across equity, fixed income and alternative investments;
She started at AP3 in 2002 as a Quantitative Analyst. both directional and market neutral strategies. The total
Two and a half years later she became a portfolio manager assets under management exceed 30 billion SEK. Part of
in the Global Equity team where she specialised in the job involves manager selection responsibilities where
selecting long-only managers. In 2007, as AP3 operated she covers both traditional long-only and hedge fund
a separation between alpha and beta strategies, Claudia’s strategies across all asset classes. Malin has 19 years of
focus extended to alternative asset strategies. experience in finance, of which 9 is at Swedbank Robur.
Today, Claudia is responsible for manager research, Before joining Swedbank Robur in 2009, Malin worked
manager selection and portfolio construction of externally at Handelsbanken Kapitalförvaltning, External Funds and
managed strategies for the alpha and beta portfolios. She Alternative Investment with responsibility for External
covers traditional long-only strategies, hedge funds and Funds within Handelsbanken. Malin has also spent
risk premia strategies across all asset classes. Claudia is close to 10 years at Skandia as a Senior Fundanalyst
also member of the Risk Management Committee at AP3. and Portfolio manager, where she had a broad coverage
across asset classes including hedge funds. There she
was a member of SkandiaLinks and Skandia Global Funds
investment committees as well as board member of
Skandia Investment Advisory Services AB.
She is a certified EFFAS Financial Analyst (CEFA),
authorized Financial Analyst (AFA), and a member of the
Swedish Society of Financial Analysts.
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The swings in favour of passive management and insourcing both ESG acceptance
have a strong basis in investment prudence and have certainly
contributed to lower expenses for equity investments, although Nordic investors have long been a driving force in the
these have often been partly offset by additional spending on increasing prominence of sustainable investing. Over the past
the alternative investment side. We have also seen notable fifteen years, ESG has definitively progressed from “ethical”
reductions in the fees offered to Nordic investors by active side-show to mainstream industry phenomenon. Many of
equity managers, particularly among more systematic strategies. bfinance’s clients in the region are long-standing participants
in international initiatives to help advance environmental,
social and governance (ESG) issues in the investment industry.
“The shift towards passive investing
has perhaps been the most visible Indeed, every single equity manager selection exercise that
we have conducted in the Nordic Region has required that
development in Nordic investors’ the manager be (or become) a signatory to the Principles
Change and Continuity:
for Responsible investing. Viewed in the region as a basic
equity allocations.”
minimum requirement, it is taken as a sign that managers
are at least aware of the importance of ESG issues to their
How Nordic Pension Funds Invest in Equity Yet new practices have not always been entirely voluntary.
For some investors, increasingly stringent cost constraints
have dictated behaviour. Stakeholder pressure has also been
clients. That being said, there is a strong awareness among
the community that many signatories have been bolting ESG
functions onto existing processes rather than implementing
a critical factor: justifying the expense of active management genuine integration. This approach is rapidly becoming
through short-term ups and downs in the market can be unacceptable to Nordic institutions, who in most cases are
immensely difficult. We have observed cases where investors looking for managers with the ability and thought leadership
by Richard Tyszkiewicz – Senior Director - bfinance have proceeded further down the “cost-saving” path than to help their clients understand complex sustainability
their senior investment staff believe will be optimal for long- themes and help them develop their own sustainable
term investment outcomes. investment policy.
F
ifteen years ago, when we began working with These constructions and combinations are increasingly
Alpha/beta separation “There is no doubt that Nordic
Nordic institutional investors, approaches to listed innovative. For example, following a successful test with
equity investing were very different indeed. internally managed domestic equities, Sweden’s AP7 gradually The rise of passive investing has also been part of a general pension funds have either led or been
moved their whole listed equity portfolio to a structure based trend among Nordic institutional investors to get a better
‘ahead of the curve’ on many of the
The rise of passive equity investing, the refinements in alpha on 100% passive market exposure complemented by unfunded understanding of – and control over – the alpha sources in
beta separation, the development of risk premia analysis and “pure alpha” long-short mandates. Another sophisticated equity portfolios. The greater awareness of risk factor exposures most significant shifts in the equity
the increasing prominence of ESG have all fundamentally investor has developed a long-term strategy around combining and their contribution towards returns, in addition to the
changed equity portfolios – hopefully, we believe, for the complementary active managers in a very effective “all- disappointment with some active managers that were suspected landscape.”
better. Meanwhile, asset allocation at a high level has shifted weather” in-house fund of funds. of “closet index” investing, led some of our clients towards
in favour of alternative asset classes, altering the task that restructuring their portfolios around a passive core, sometimes Interestingly, some of the best managers to come through our
listed equity investments are expected to accomplish. supplemented by carefully combined smart beta strategies and ESG assessment do not score particularly well within the PRI
Cost compression
benchmark-agnostic unconstrained “satellite” managers. framework. Some of them do not even market themselves as
Yet these much-debated changes, outlined in greater detail The shift towards passive investing has perhaps been the most ESG managers. Our Nordic clients typically look for managers
below, mask certain elements of consistency and continuity. visible development in Nordic investors’ equity allocations, The message has been clear and powerful: investors no that have a long track record of integrating non-financial
Fifteen years ago, the majority of equity manager selection followed closely by the related trend of investment insourcing longer intend to pay active management fees where they are criteria in their stock selection, most often on the basis that a
activity by these investors, whether for global or regional – the move to manage a greater proportion of investments not due. focus on all aspects of ESG will favour sustainable companies
markets, focused on long-only strategies with a preference for in-house, sometimes running them on a more systematic for solid long-term investment.
bottom-up stock picking, a clearly explicable investment process enhanced model. Yet onlookers should not be deceived into thinking that this
and a pooled vehicle structure for ease of administration. means active management is out of favour among Nordic
Impact investing evolution
The insourcing trend is, in part, a by-product of the quite rapid pension funds. We are still running a consistent stream of
Today there is still a strong appetite for long-only active consolidation taking place in the Nordic pensions industry. searches for active equity managers for Nordic institutions. Driven initially by Nordic foundations with various
equity managers with many of the same key characteristics, Once a pension fund reaches a certain critical mass it can justify Indeed, we note a resurgence in the popularity of active philanthropic and developmental aims, ‘impact investing’
although in many cases these must now clearly complement the internal resources needed for asset management. As seen managers among some contrarian Nordic investors who view has become increasingly popular among some of the larger
passive or smart beta strategies – and each other – rather in the Dutch market, the next step in this growth process can the general shift into passive as an excellent opportunity to investors in the region. These strategies seek to achieve
than stand alone. be to offer asset management services to third party clients. add some of the best active houses into their portfolios. various explicit positive outcomes alongside financial returns.
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18 19www.hedgenordic.com - March 2018
IPM sees the world as it really is. The only certainty is change. In order to gain
insight into an environment that is in constant flux, you need a continuous flow
This approach is generally oriented towards private significant shifts in the equity landscape. Better active
of new ideas and a rigorous means of filtering them.
equity, thanks to the direct access to and involvement management fees, more sophisticated portfolio design
with portfolio company management. Nevertheless, there and smarter asset manager analysis have all contributed That is our investment process, based on the belief that market prices will fluctuate
is increasing appetite from Nordic institutions for impact to improvements. The past decade has seen particularly around the true, fundamental value of financial assets. A vast number of human and
investing in public equity markets. The greatest challenge interesting innovations, although the driving pressures natural factors influence investors’ perceptions and impact how they value financial
assets. Ultimately, what matters is what these assets are truly worth, after the
is the accurate measurement of the positive outcomes – particularly on the cost side – have not always been
rising and falling of the tides.
that investors are seeking to achieve. Industry participants entirely positive in their effects.
are hard at work trying to improve data access and agree Find out more about our approach at ipm.se or contact us at info@ipm.se
on some form of standard reporting that would allow for Active management has emerged from this phase with
better assessment of impact managers’ performance. a somewhat smaller, but perhaps no less important, role
in portfolios. Diversification, genuine alpha generation,
There is no doubt that Nordic pension funds have either ESG and impact goals are of critical importance in today’s
led or been ‘ahead of the curve’ on many of the most Nordic pension market.
Richard Tyszkiewicz,
Senior Director - bfinance
The tide
will turn
IPM Informed Portfolio Management was founded in 1998 with the purpose of delivering robust investment strategies with
a systematic investment process to institutional investors. Today, IPM is primarily recognised for its multi-asset systematic macro
strategy, but also for its Smart Beta equity strategy, both building on similar investment principles.
IPM is regulated as an AIFM by the Swedish Financial Supervisory Authority (Finansinspektionen), and registered with the U.S.
Securities and Exchange Commission an investment advisor, and as a CPO/CTA with the Commodity Futures Commission.
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Is it a bird, is it a plane...?
Petri Tuutti
No, It´s visio! by Jonathan Furelid – HedgeNordic
“Our main priority has
B
y focusing on what matters - bringing absolute returns to The Visio Allocator fund has delivered on its promise to The Allocator fund is currently co-managed by three
end investors - Finnish asset manager Visio has proven its outperform equity markets to a significantly lower risk portfolio managers. Next to Tuutti, who founded the
always been to deliver worth since launching in 2010. The fact that investors fail than that of stocks, earning it a five star Morningstar rating company in 2009, the team also includes Antti Aalto who
competitive absolute to frame them in a style box is of secondary importance, the firms and recently also giving them the Morningstar award as joined the firm from Danske Markets in 2012 and Sami
founder and CIO, Petri Tuutti, argues. the best allocation fund in Finland. Listola, who joined from Finnish asset manager FIM only
returns and to do that last year.
with controlled risk.” There is an old slogan from the iconic jeans label Levi’s saying that “Our main priority has always been to deliver competitive
“quality never goes out of style”. While that is probably all true, absolute returns and to do that with controlled risk. We
Finnish asset manager Visio has never been too concerned about are investing alongside our investors in the fund which
Stock-picking at the core
the label attributed to their style of trading, but rather focused on means that there is an alignment of interest from day one”,
bringing quality of returns to end investors. And indeed, trying to Petri Tuutti, Managing Director and CIO of Visio Asset The Visio Allocator fund is an absolute return fund
stick Allocator in a box with a clearly defined label will clearly cause Management explains. focusing on Nordic equity markets. At the core the strategy
a challenge. The fund is typically very directional, but has market employs a stock-picking approach that Tuutti describes as
neutral overlays, it trades large cap to small cap stock, corporate Tuutti has a long background managing investment being Visio’s edge. The portfolio typically consists of 20-
bonds, options and futures. The fund has a value approach at its portfolios. In the 1990’s he managed equity portfolios for 30 Nordic large- and mid-cap stocks with some small cap
core. the Finnish mutual insurance company Fennia and was stocks blended in. On top of that, the portfolio trades an
also the first equity portfolio manager at Varma, Finland’s equity market neutral strategy, an equity hedging strategy
Although that has certainly been a challenge from a marketing largest pension fund. In 2000, Tuutti co-founded Avenir, and also invest into corporate bonds.
perspective, with investors typically failing to frame the investment a multi-strategy hedge fund that was managed under the
program in a pre-defined hedge fund category, the performance Brummer and Partners umbrella organisation. Tuutti left “The corporate bond strategy should be seen as a
profile of the fund since launching in 2010 speaks for itself. Avenir to set up Visio in 2008. complementary to our equity trading, whenever we find
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22 23www.hedgenordic.com - March 2018 www.hedgenordic.com - March 2018
opportunities that offer good risk return characteristics.
This means that the proportion of bond allocations can
“90 percent of the profits we
vary significantly over time, in 2010 and 2011 when have made in equities is from
interest rate spreads were high and the return potential
in high yield was significant, we held 60 percent of the
positions in large caps, only 10
allocation in corporate bonds, today, that number is below percent relates to mid- and
10 percent”, Tuutti says.
small cap positions.”
Since the start of the fund, the majority of profits have
come from fundamental equity positions where Visio Tuutti also mentions that the inherent characteristics
estimates the intrinsic value of a company and builds a of the different Nordic markets make a case for good
balanced portfolio of what they see as mispriced Nordic diversification benefits. “By combining the different
securities. Most of the profits have come from positions in Nordic countries in a portfolio provides basis for good
large cap stocks, Tuutti says. diversification, Norway for example relies more on energy
and Denmark being a defensive market are good examples
“90 percent of the profits we have made in equities is from of that”, he says.
positions in large caps, only 10 percent relates to mid- and
small cap positions.”
Current positioning and ways
Through the balanced equity portfolio, Visio targets to forward
exceed equity market returns over a business cycle. Tuutti
stresses that it is the ability of Visio to stay more defensive Being value-driven at the core, Visio has no negative or
in difficult periods in equity markets that explains the positive bias built into their investment strategy. The
outperformance over time. long exposure in equities is based on the amount of
cases offering excellent return potential relative to their
Are institutions flexible enough
“Succeeded by actively managing the downside in these risk using a fundamental bottom-up view. Except for a
periods we have to stay ahead of the equity markets while period in the very early days of the fund, when they were
keeping portfolio volatility lower than the European stock positioned for a risk-off scenario, Visio has held a long bias
for real diversification?
markets on average. This is where our index hedging and since late 2011.
market neutral portfolios come into play”, he explains
continuing: “Both economic and company specific fundamentals have
been supportive for quite some time which has made us
“We are very active on the derivatives side, using futures hold on to our positive view for many years and to be
for hedging purposes as well as to increase or decrease significantly invested in stocks”, says Tuutti. The recent
sector exposures. Options are also frequently used to sell-off and heightened volatility levels in equity markets
manage individual positions and to hedge risks.” have not materially changed this view. Aline Reichenberg Gustafsson, CFA – HedgeNordic
“Looking at what happened in early February gives a
The benefit of being local
I
fairly good idea of what can happen in the markets when
momentum takes overhand. This is being emphasized n a low bond yield environment accompanied by rich who explained the advantages of investing in the market
Tuutti emphasizes that the Nordic focus is very important by the increased use of momentum based ETF’s. We equity valuations, relying on differentiated strategies for US life insurance policies, while discussing the
for bringing Visio´s value added to the portfolio over time. are currently using and looking to further develop such and new asset classes is more important than ever. challenges he encounters when talking to local investors.
indicators to better capture the momentum impact of Not many low-hanging fruits are left ripe for the picking,
“I think it is a combination of the fact that we know the equity market performance, both on the long and the short as institutions are hunting for every bit of sound alpha In essence, Resscapital´s strategy consists in taking over
culture, the companies and the investors here, you know side”, Tuutti explains. available. life-insurance contracts from individuals who no longer
how people usually act which makes a big difference when need them. Instead of letting their policies lapse, people
making investment decisions. Also the Nordic region One strategy however, locally managed in Stockholm can sell them and collect a lump-sum. The investor
as such offers many interesting opportunities since it is but investing in assets across the pond, could provide continues to pay premiums to the insurer and collects the
reflecting the opportunities in the developed world overall.” a welcome diversification. But are Nordic institutions policy payout at the end of these people’s lives. Practically,
flexible enough to open their portfolios to a new asset the mechanism very much resembles a fixed income
class? We spoke to Gustaf Hagerud, CEO of Resscapital, investment, as it involves a schedule of cash flows. The
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24 25www.hedgenordic.com - March 2018 www.hedgenordic.com - March 2018
knowhow when it comes to coordinating the process with such instruments from a moral perspective. “We have
the different links in the transactional chain,” adds Hagerud, “Often we find that worked a lot with this aspect,” Hagerud explains.
“as well as ensuring that we limit any operational risk once
the policy is in our portfolio. We have also accumulated
investors put the fund in “For some time now, we commissioned an ethical
assessment of the investment strategy that shows how
more than five years of experience in valuing these assets the alternative investments the market for life insurance policies actually favours
in the context of our fund.”
bucket, together with funds the consumers, as it procures a financial payoff for
something that would otherwise be worthless. Now we
In 2017, when Resscapital’s fund, Ress Life Investments that have a significantly have taken one step further and set up a sustainable
started approaching the hailed USD 100 million mark,
the company decided to hire Hagerud to take the fund
higher risk profile, such as investment policy to show how we take ethics as well
as other responsible investing questions at heart. As a
to institutional investors. Until then, the fund had grown private equity, for example.” result, we have become signatory of the UN Principles
steadily with the support of individual investors, family for Responsible Investing (PRI) last year.”
offices and medium-sized institutions under the leadership
of founder Jonas Mårtenson, who now focuses his efforts in and out of the fund. Ress Life Investments is an open-
exclusively on marketing. Mårtenson comments: “With his ended fund with the possibility to subscribe or redeem like
institutional background, as Head of Asset Management in many alternative investment funds, but it is also a listed
at the Swedish public pension fund AP3, as well as his company on the Copenhagen Nasdaq stock exchange. For
expertise in global tactical asset allocation from AP1 and redemptions, we require a seven-month notice, in order
Alecta, Gustaf can really help us to position the fund for to be able to sell off policies in this illiquid market, while
larger investors. We believe that Ress Life Investments can taking care of the interests of investors with a longer
Jonas Mårtenson, Sales Director & Founder
provide diversification to them, with a return level that they investment horizon.”
may not obtain otherwise. But the investment process of
timing of the final payout is uncertain for each individual pension funds is very different from that of the investors Despite this opportunity to add return to most portfolios
investment, but over a large number of policies, the we approached until now. They have bigger teams and are without increasing the level of risk, especially in this
average can be estimated fairly accurately. The valuation more sophisticated in their asset allocation and manager low yield environment, there seems to be a structural
of the individual contracts relies on a statistical model and selection.” impediment for some institutions to invest in Ress Life
on the actualisation of expected cash flows. The measured Investments. “Often we find that investors put the fund
volatility of the fund mainly depends on a mark-to-market in the alternative investments bucket, together with funds
model that takes into account recent transactions, even “The measured volatility of that have a significantly higher risk profile, such as private
if the plan is to hold most assets to maturity, in principle.
It is easy to see how such an asset class is absolutely
the fund mainly depends on equity for example,” says Hagerud. “Our risk profile is much
closer to fixed income however with a volatility estimated
uncorrelated from any other. a mark-to-market model at around 3.5 percent, but we offer a higher return with
“Of course, investing in life insurance policies carries its
that takes into account a target of 7 percent, and our Sharpe ratio is superior to
many of the higher-risk alternatives. We also offer a level
own risks,” explains Hagerud. “Longevity is one of them. recent transactions, even of fees that is competitive for our risk category.”
Gustaf Hagerud, CEO
Like for any insurance-linked security investment, there is
an informational asymmetry. The seller always knows more
if the plan is to hold most All in all, the investment cycle for larger investments can With all the stars lined up, Ress Life Investment is now well
than the buyer. What we do to remediate this problem assets to maturity.” also take quite a long time, especially when it comes to an positioned to grow its assets but capacity is limited in the
is that we rely on the solid expertise of independent unfamiliar asset class. “Compared to the US where this is current product. “We only have space to grow the fund to
medical underwriters.” Another reason institutions would a well-known investment area, it may take a little longer to about two and a half times its current size of approximately
be prudent not to invest directly in such securities is that During his first few months on the job, Hagerud spent convince European investors, and Nordic investors even USD 90 million,” continues Hagerud. “Our marketing
the transaction itself and the management process of the time talking to his former colleagues and peers, as well more so. They need time, as they first need to understand strategy is to target those investors focused primarily on
policies once purchased are fairly complex. The market for as a wider array of Nordic and European institutional how the market works, and then get to know the product that unique offering we have to procure stable, yet totally
life insurance policies is highly regulated in the US to ensure investors. “We typically get a very positive response from and its characteristics.” uncorrelated returns. We are growing also outside the
customers really benefit from the advantages of being able these institutions. They are particularly attracted to the Nordics, mainly in the rest of Europe where are already
to sell their policies at a fair price instead of letting them uncorrelated nature of the returns we provide. Another As the payout is triggered by the death of the policyholder have some investors. Interestingly, we are also seeing
lapse without any payoff. “We have developed a strong feature that investors appreciate is that there are two ways some investors are uncomfortable and have questioned strong interest in Asia.”
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26 27www.hedgenordic.com - March 2018 www.hedgenordic.com - March 2018
“Out of almost 850 funds only 10 are categorised as hedge funds”
e
u t of th ds
“O n
st 850 fu rised
almo re catego y
10 a ds b t
only edge fun ng that i
h i by Pirkko Juntunen – HedgeNordic
as prov ed
in g star, a favour
Morn ot been ge fund
has n e by hed .”
PPM Reform
rout anagers
m
Tough Swedish premium pension system
getting tougher for alternatives
New stricter entry criteria are expected to
come into force on July 1 for the Swedish
premium pension system, PPM. The tougher
rules are expected to lead to fewer funds within
the system and in the long run result in the
platform becoming a professional buyer which
would likely further cull the numbers.
H
ow will this affect well as having certain levels of
hedge funds? Is it likely transparency. These criteria have
going to increase the already deterred hedge fund
opportunities for alternative funds managers from entering. Out
to be offered on the platform? of the almost 850 funds only 10
are categorised as hedge funds
Current rules stipulates that funds by Morningstar, proving that it
registered on PPM must be UCITS- has not been a favoured route
compliant, have daily trading as by hedge fund managers. In
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28 29www.hedgenordic.com - March 2018 www.hedgenordic.com - March 2018
The first hedge funds entered the PPM system in 2009 as UCITS funds.
particular, the rebate system on fees may have been a reformed system. The asset management companies and Amundi Luxembourg. Advisor, Ålandsbanken, The government has stated there will be a second
major disincentive for hedge funds. Many hedge fund that wish to continue offering funds on PPM will have NN Investment Partners Norron, Amundi and SEB and stage in the PPM-reform process. This will likely mean
strategies have capacity constraints where maximising until October 1 this year to do so. Ole Settergren, head of would all be over the SEK500million fund AUM hurdle. that the fund platform will become an institutional
margins is key given the AUM, rather than compromise the analytics department and intermittent head of the Out of the six all, bar Ålandsbanken, also have the buyer, suggesting that the number of funds could
the strategy for ‘uncontrolled’ inflows in the current new fund platform department at Pensionsmyndigeten, three-year performance track record required for the then be slashed further. Having a distribution-platform
PPM system. However, fee pressures are also increasing the Pension Agency, which is the administrator of funds registered under the new stricter rules. professional such as Fransson at its helm is seen by
within alternative UCITS funds which may point to PPM PPM, said it is expected that the new system will start industry participants as a good move for the future of
being viewed as an attractive platform in the future. operating at the beginning of 2019. Currently only 21 out of the 105 asset managers offering Swedish pensions.
funds in the Swedish premium pension system will be
Existing funds that do not meet the new criteria, or if the unaffected by the new stricter rules expected to come There has been and continues to be a lot of speculation
While large established players companies choose not to re-register, will be booted out into effect on July 1 of this year. about the final design of the new PPM. Settergren
with a broad spectrum of products of the system. Investors will be informed and have to said there are no specific requirements on how many
option of making an active selection where to transfer Out of the 837 funds on the system 314 will not meet funds or the type of funds that will finally end up on
may be overall winners, there will
their funds. If a choice is not made assets will go to AP7 the new criteria. These funds have assets totalling SEK the system. PPM is often not viewed as a single entity
be an opportunity to increase Såfa, the government default option within the system, 321 billion. Out of the 105 asset managers offering the but should the second step in the reform materialise,
the proportion of good, well-run Settergren explained. This has of course also led to funds, 36 will see all their funds on the system affected, making it an institutional buyer, it will surpass the AP
alternative products, such as hedge speculation about what to do should AP7 grow in size, whereas 81 will see some of their funds affected, and funds in size. It currently has SEK1000 billion in assets,
funds, within the PPM. i.e implications for investment strategy among other only 21 will remain unaffected, according to statistics and by 2060 when the system has matured this will
concerns. As a government entity this will likely lead to from the agency. Some 2.4 million investors within the have grown to SEK4000 billion.
more enquiries to seek a solution, if need be. system will be affected by the changes.
Some say hedge funds are complicated and expensive, Last summer Skandia commissioned a report on the
others argue the benefits of a stable return irrespective The background to reforming the PPM is various scandals Under the new rules the agency will have extended Swedish pension system, penned by the aforementioned
of market conditions. This would make hedge funds within the system and in particular unscrupulous powers as a gatekeeper of the system, enforcing the Langensjö. In his report Langensjö suggests a new
particularly attractive now due to the fear a correction telesales techniques that has seen investors being stricter criteria. The new fund platform department platform where choice remains but is relevant to the
as equity valuations look expensive across the board. taken advantage of. In addition, the end outcome being created within the agency will oversee the quality outcome, ie secure pensions by maximising returns
was not in the forefront when the current system was of the funds. Erik Fransson is joining from SEB, where and minimising losses. The relevant choice term
However, concerns about the ability and indeed interest introduced. At least it was not clearly communicated, he has held several senior positions including working would mean that the fund platform would act as
of the general public to select a well-diversified portfolio leading people to make poor choices and perhaps not with the firm’s fund platform, to head up the operations one institutional entity. He proposes seven portfolio
remain. Adding hedge funds and other alternatives realising the effect this will have on their pension. The starting March 6. It is expected that the current team of choices which would be vetted and would have clear
without reforming the platform would therefore government wanted to increase consumer protection 18 will be increased to 30. risk-return profiles and outcome scenarios presented.
not serve any purpose is the argument. Industry and has been pushing for stricter product information, The fund platform would remain but individuals who
participants and commentators all seem in agreement transparency and sustainability issues for the fund would opt out of the seven portfolios would be made
that professionalising the PPM platform through the industry, not just within PPM. Currently only 21 out of the 105 aware that they are stepping away from a professionally
ongoing reform process is a good thing. They argue that vetted and monitored system and will be responsible
while large established players with a broad spectrum Making the rules even stricter may not seem to bode
asset managers offering funds in the for the outcome themselves. Those who do not make
of products may be overall winners, there will be an well for alternatives. However, the overhaul will for Swedish premium pension system an active choice would still go to AP7.
opportunity to increase the proportion of good, well- sure open up the system, particularly as more focus will be unaffected by the new stricter
run alternative products, such as hedge funds, within will be on the evaluation of the providers by a new rules expected to come into effect. A system with a defined ambition and relevant choice
the PPM, particularly in the second phase of the process. fund platform department within the agency as well as profile would not necessarily need the current level of
three investment consultancies. liquidity and therefore open up to other fund structures
In the first step of the government proposal, which is As the new department is being constructed the than UCITS. Speculations about the end result continue
out for consultation, asset managers will be required According to Morningstar statistics there are currently agency has appointed three consultancies to help with but due to the strong political implications, including
to have a minimum of a three-year operating history, a 10 funds categorised as hedge funds on the PPM evaluating the fund companies wanting to enter the the upcoming elections, and interests of other powerful
three-year track-record of every fund offered as well as platform. The first hedge funds entered the PPM platform in its new form. The consultancies are Omeo entities, whatever the outcome is it is likely to become
a minimum of SEK500 million in assets in each fund. In system in 2009 as UCITS funds. The current funds are Financial Consulting, Transcendent Group as well as a compromise in true Swedish style. Hopefully this
addition, a maximum of 50% of a fund’s asset can come managed by Atlant Fonder, Advisor, Ålandsbanken, Arkwright Group. Mats Langensjö, an investment and compromise will have more foresight than the original
from PPM inflows. All existing contracts will be void Zmartic Fonder, SEB Investment Management, NN pension veteran recently joined Arkwright. design, keeping the end-goal of secure pensions in
and asset managers will have to re-apply to join the Investment Partners, Norron, Pacific Fonder (2 funds) mind.
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