Home > News > Asset Allocation > Sweden’s Largest Pension Plan’s $200 Million Anchor Commitment Rockets Co-Impact Fund Above Target
Asset Allocation

Sweden’s Largest Pension Plan’s $200 Million Anchor Commitment Rockets Co-Impact Fund Above Target

Second close is expected to net another $750 million.

By Chris Butera

Alecta, Sweden’s largest pension fund, has committed a $200 million anchor investment for an impact fund co-investing in emerging market loans, overshooting the fund’s target by $50 million.

Closing 25 percentage points above target at $250 million, the new fund is a collaboration of NN Investment Partners ($296 billion) and the investment arm of Dutch bank FMO ($10 billion). A second close due later this year is expected to net another $750 million, which NN credits to FMO Investment Management’s annual loan commitments of more than $2 billion.

The closed-end NN-FMO Emerging Markets Loan Fund invests in loans with an emphasis on environmental, social, and governance (ESG) investing in emerging markets. This includes renewable energy projects and agribusiness companies. However, the closed-end nature presents the opportunity for an investment within the fund to fall into the alternative fixed income, private, or emerging markets debt classes.

Magnus Billing, CEO of the $90 billion Alecta, called the anchor decision “a good example” of how the occupational pension plan, which covers the retirement benefits of therapists, doctors, and lawyers, can meet its sustainability goals. In a statement, he said the NN/FMO fund creates “measurable impact aligned with the 2030 Agenda for Sustainable Development Goals.”

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The cooperative fund also received investments from the IMAS Foundation, the investing arm of the indirect owner of IKEA, the INGKA Foundation.

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Home > News > Risk > Corporate Pension Bond Bulls Could Further Flatten the US Treasury Yield Curve
Risk

Corporate Pension Bond Bulls Could Further Flatten the US Treasury Yield Curve

Fear of a downturn creates a rise in de-risking.

By Chris Butera

The yield curve may keep flattening due to more corporate pensions looking to de-risk by moving their assets into fixed income.

According to Reuters and a report from Seattle-based consultant Milliman, the US equities rally of 2017 and larger pension contributions helped bridge the gap for corporate pension plans between assets and pension liabilities by $72.4 billion.  

According to Milliman’s 2018 Corporate Pension Funding Study, the average funded status ratio for the 100 largest corporate US plans in 2017 was at 86%, up five percentage points from 2016.

While positive returns kept optimism bright, many plans have decided to shift a chunk of their assets into a lower-risk environment as not to repeat some of 2008’s mistakes, as economists and institutional investors such as Bridgewater Associates Ray Dalio predict a downturn in the coming years.

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Reuters reports that equities being converted into long-term debt has increased demand for corporate bonds as well as 10- and 30-year US Treasuries. Although the 10-year Treasury yield broke 3% on Tuesday, the curve is still flatter than it was at the beginning of the year.

According to Reuters, a total $1.5 trillion of corporate pension assets could boost bond rates enough to flatten the long end of the yield curve, which has been occurring aggressively over the past six-12 months.

Michael Moran, chief person strategist at Goldman Sachs Asset Management, told Reuters that although there is some speculation about how much money will go towards fixed income, it’s possible for US corporate pension plans to buy roughly $150 billion in high-quality, long-duration fixed income every year for the next several years.

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