Art by Wesley AllsbrookAfter 15 years on the team that developed and implemented a groundbreaking investment strategy at Denmark’s national pension ATP, Anders Hjælmsø Svennesen joined the €41 billion Danica fund in December as CIO.
(Phone rings)
AHS: Liz, it’s Anders—I got your phone messages, sorry it’s taken so long to call back.
CIO: Anders! You’re a difficult man to pin down.
AHS: Yes! We are in so many meetings at the moment discussing the new investment strategy that I’m rarely at my desk. I have another presentation to do in 15 minutes…
CIO: So we’d better talk quickly. How far along are you with creating the new strategy? You’ve only been at Danica since December.
AHS: We are looking at what we should focus on within the pension fund at the moment. What we can change—and what we should change. It’s a really big project. In five or six weeks, when we have created stable plans, we will take our findings and ideas to the board.
CIO: Is the challenge of it all the reason you left ATP? You seemed very happy there.
AHS: I was offered a great opportunity to build something new, to build an investment strategy from scratch—and this time as the CIO. It was the same situation as when we started out at ATP in 1999, but I was not at the end of the table then as I am now. It was an exciting time. Being offered the chance to do it again—but now with all the lessons I learned over the past 15 years as experience to draw upon—made this too tempting an opportunity to miss.
CIO: How similar is the set up at Danica to ATP? They seem—on the face of it—to be very different entities.
AHS: Danica is different. It is a commercial fund, rather than a state-backed one. We have some products with guarantees and others without. So in that way, the two have different objectives and what suited one will not necessarily suit the other, but the methods of thinking that we used at ATP and the academic approach we took to problem solving is still 100% applicable. I know what worked well at ATP and what did not—and I know how we worked it all out.
CIO: But also the markets are very different now from 1999 when you joined ATP and started the whole thing going.
AHS: They are very different indeed. And over the 15 years I was there they changed a lot. Almost straight away we had the dot-com bubble during which we had a classic equity/bond portfolio. Then the Danish Financial Supervisory Authority brought in the traffic light system for monitoring pension fund risk and solvency, which meant we changed our business model entirely. It was at that point we started looking at a number of new ideas including alpha/beta separation and risk parity—and if you remember, yields were at 4% to 5% then. Now we have the Eurozone crisis and the effects of quantitative easing to deal with…
CIO: And who knows where we will end up. But you are not starting entirely from zero and building from the ground up, are you? What about the legacy assets?
AHS: No, no. We have a portfolio of DKK 305 billion (€41 billion) and a lot of the investments we have inherited are working very well, so we must retain them. What is important is that at the top level we have an asset allocation that we really like. If there is a legacy investment that does not fit with that, we will get rid of it. But we also have the option to adjust existing investments and/or their risk profile to make them work within the overall portfolio rather than just selling them off.
CIO: So you’ve not regretted leaving ATP yet?
AHS: (laughs) I’m very positive about the move. I’m very excited. The environment at ATP was academic and I want to create the same at Danica—if not improve on it. It is a very important way to approach investing, especially in the current market environment.
CIO: That’s why you’ve not asked me for my CV… Anyway, over the past 15 years, many asset managers and banks must have approached you: Why not work for one of them?
AHS: I was always happy at ATP and saw my next step as becoming a CIO. If I could possibly use my experience to create or develop something, not just as a “plug and play”, but something new, I wanted that challenge. I have the opportunity now to do things differently, to shape an organisation. Not just regarding the investments, but the culture of the place and its values too. It’s important to get the right people alongside you and build a good team.
CIO: And are you all in place now? I know you can’t tell me any specifics about the investment strategy—the board hasn’t agreed to it yet. But when you joined, Danica said there would be more direct investment, which is a growing trend in the Nordics.
AHS: We have around 28 people on the team, which includes the real estate and direct investment teams. It’s a fairly good size. It’s not too big, although it is big enough to be able to find investments. It’s manageable. We may grow by two or three people in the next year, but we are about right now.
CIO: What is the most exciting thing for you at the moment?
AHS: Taking over the role, turning the portfolio around, and seeing what’s the best we can do. We want to make this portfolio perform and we have another five or six weeks to make sure we can do it before taking it to the board.
CIO: You sound confident about it… but you always sound confident.
AHS: We are getting there. We have to ask the right questions: Are there any structural issues with the portfolio? Are the right instruments in place or what do we need there instead? What has been doing well? What has not? This is the direction our conversations have been moving in since December: Keeping the good things and removing what’s not working well. It’s hard work—but it’s satisfying.
CIO: Anders, we have been on the phone 16 minutes. You are late for your next meeting.
AHS: Yes! I have a presentation to do. I had better go. Stay in touch and I’ll have more to tell you in five or six weeks.