(November 22, 2013) – Swedish bankers’ pension fund SPK will drastically alter its asset allocation strategy, increasing its portfolio from three asset classes up to 10 in 2014.
CIO Peter Hansson first broke the news to aiCIO back in September, but was limited at the time on how much he could divulge.
Now, however, Hansson explained the decision had been taken to expand the portfolio into up to 10 asset classes—down from an earlier suggestion of 15—with all of them being controlled by external managers.
“We started to redesign the asset and liability of SPK in February,” Hansson said. “We spoke with five different parties – Goldman Sachs, JP Morgan, Danske bank, Deutsche Bank, and Nordea, and had extended conversations about our asset liability management which passed back and forth.
“We then redesigned and tested everything, and we’ve now seen that we need to make a new strategic allocation for the future. We started with a blank piece of paper, looking at the situation right from the beginning.”
At the moment the fund is invested 70% in fixed income, 20% in global equities, and 10% in Swedish equities.
Although he was not willing to divulge exactly which asset classes the pension fund would be moving into, Hannson did say the investments would all be done on a fund basis, rather than through discretionary accounts.
“When we started the process we looked at 30 to 40 asset classes and deleted them one by one while asking if they’d have an impact on our fund or our organisation. The SPK DNA of ‘Keep it Simple Stupid’ will still exist, we want to keep it simple,” he said.
That simplification will apply to how managers implement their strategies too: in Hannson’s words SPK is “good at hiring and firing managers, and so we need them to be easy to jack in and jack out”.
And Hansson was adamant that allocation strategies, foreign exchange overlay, derivatives strategy, and short-term risk control will continue to be run in-house.
One area the fund is less interested in is the current trend for environmental, social, governance and/or social responsible investment (SRI) funds.
As other pension funds in the Scandinavian and Nordic areas increasingly look at direct investments and doing more than simply applying filters to indices, Hannson dismissed the idea of having an ethical fund as one of his new options.
“On a yearly basis we scan our holdings, even if they’re in funds, and then decide what to do. But we won’t limit ourselves to just having SRI products, we think the fund managers should do that,” he explained.
Further analysis and testing will continue until the end of this year, when Hansson will finalise on his final asset class set up.
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