The SEK420bn (€39.5bn) Swedish national pension fund AP1 has revealed a steady increase in the proportion of its investments that are managed internally over the last three years, saying the benefits of in-house management are particularly important in today’s volatile markets.
Last Monday, the new Swedish Fund Selection Agency announced it had hired AP1’s Majdi Chammas and Tina Rönnholm to oversee asset manager selection for the €200bn premium pension platform it has been formed to run.
At AP1, the pair – who will start their new jobs on 26 September – both hold the title ‘external partnerships and innovation’.
A spokeswoman for AP1 confirmed to IPE that the buffer fund, one of five backing the income pension system, would not be replacing these two external manager specialists.
AP1 had started increasing its ambitions a few years ago to manage a greater proportion of the fund capital internally, she said.
Given the “very positive results to date” from such changes already made, she said, this might be extended to additional strategies.
Asked about the move towards internal management, AP1’s chief executive officer Kristin Magnusson Bernard told IPE: “We continuously try to optimise our investment strategy in terms of asset classes, strategies and exposures to achieve the highest expected returns.
“Part of that work consists of figuring out when and where to rely on external partners and when to manage capital in-house,” she said.
The CEO said external management was preferable in areas where desired exposures required fund structures or considerable team size – for example, private equity.
“Beginning in 2019 we have gradually increased the share of the portfolio managed internally as we have found substantial benefits such as effective liquidity management, dynamic allocation and act on rapidly-changing ESG opportunities,” said Magnusson Bernard.
“We have found those advantages to be even more important in the current volatile market environment where opportunities both in listed and private markets might arise very quickly,” she said.
As to whether increasing the degree of in-house management meant AP1 was having to hire more staff, Magnusson Bernard said: “In terms of staffing our portfolio managers are very happy with the scale benefits of internally-managed funds, while we have added colleagues to our back office team to, for example, handle the increased number of corporate actions.”
Sweden’s state pension consists of the pay-as-you-go income pension and the defined contribution premium pension system of individual accounts.
Magnusson Bernard has been leading the income pension buffer fund for two years. In 2019, AP1’s previous CEO Johan Magnusson was sacked for breaking the fund’s securities trading rules.
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