Welcome to the spring edition of Nordic Region Pensions & Investment News, Financial Times Business’ quarterly publication dedicated to the pension and investment industries in the Nordic countries.

Velkommen til den forårsudgaven af Nordic Region Pensions & Investment News, Financial Times Business’ kvartalsvise publikation for pensions- og investeringsbrancherne i de nordiske lande.

Tervetuloa lukemaan Financial Times Business –yhtiön Pohjoismaiden eläke-ja sijoitustoimialoille suunnatun ammattilaisjulkaisun kevätnumeroa.

Velkommen til vårutgaven av Nordic Region Pensions & Investment News (Pensjons- og investeringsnyheter for nordisk region) en dedisert kvartalsvis publikasjon fra Financial Times Business for pensjons- og investeringsindustrien i de nordiske landene.

Välkommen till vårens upplaga av Nordic Region Pensions & Investment News, kvartalspublikationen från Financial Times Business för pensions- och investmentsektorn i de nordiska länderna.

Norway’s new tjenestepensjon legislation and low interest rates have prompted several local pension funds to change their schemes from defined benefit to defined contribution.

Vital, the E25.4bn Norwegian pension and life insurance company is expanding its emerging market equity portfolio from 3 to 5 per cent of its total equity exposure. Equities currently form 23.3 per cent of the fund’s total investment portfolio.

Nordic pension and life insurance funds investors have little or no interest in the field of SRI, according to the results of nrpn’s latest quarterly investment survey.

ATP, the €48.94bn Danish Labour Market Supplementary Pension Scheme, is tendering for a new global custodian.

The €8.2bn Finnish State Pension Fund (VER) is to invest approximately 10 per cent of its portfolio in alternative asset classes over the coming four to five years. At present, the fund’s portfolio is divided between bonds (60 per cent) and equities (40 per cent). VER has also minor holdings in hedge funds and private equity.

Wassum is in the middle of producing an overall evaluation of the AP funds, which will look at and evaluate the funds’ investment strategies, as well as decisions made by the board and the operative management of the funds.

Sampension has awarded a DKr1bn Danish equities mandate to Nordea and Loenmodtagernes Dyrtidsfond. The mandate has been split in two with both houses sharing a equal slice (DKr500m) of the equity brief.

The second year of Folkebørsen, the Danish electronic savings platform, has started with a boom in emerging market equity funds. The platform, launched in January 2005, currently has assets totalling DKr50bn (€6.7bn). The scheme is managed by ATP, the €48.94bn Danish labour market supplementary pension scheme.

• Vital, the €25.4bn Norwegian pension and life insurance company, has appointed Kjerstin Fyllingen as the new leader of its public sector. Ms Fyllingen joined Vital in October 2002 and was most recently its executive vice president, customer service at the division for individual clients. Ms Fyllingen takes over from Joachim Hoegh-Krohn who joins Argentum, a nationalised investment company.

In a series of steps to reduce the impact of future demographic change, Finnish institutions are set for a greater allocation to equities in order to increase opportunities for higher returns. Reeta Cevik reports

PP Pension, the Swedish journalists’ fund, is to add hedge funds and private equity to its portfolio. Tomas Lindstrand, CEO of the SKr7.6bn (€805m) fund, told nrpn that hedge funds and private equity would be added to the fund’s portfolio later in the year at the expense of its property investments.

TeliaSonera’s SKr16.2bn (€1.71bn) corporate pension fund is planning to add a new manager to its Japanese equity portfolio. Peter Antonsson, CEO of the fund, told nrpn that TeliaSonera is considering expanding its Japanese holdings because of the fund’s positive returns from its Asian investments.

Kyrkans pensionskassa, the SKr7bn (€742m) scheme covering the employees of the Swedish church, has announced it is expanding its equity portfolio at the expense of its bond exposure.

Kredittilsynet, Norway’s financial services regulator, is drafting a set of new investment regulations for local pension funds. Hanne Myre, head of the pension and insurance department of Kredittilsynet, told nrpn that the purpose of the new regulations is to bring the existing investment regulations closer to the pan-European occupational pension fund directive (2003/41/EC), which has also been adopted in Norway. The regulator aims to send the draft regulations to the ministry of finance by May this year.

Kredittilsynet has also outlined plans to introduce a new system to supervise the capital requirements for Norwegian insurance companies and pension funds. The proposal is currently being considered at the ministry of finance.

With a 22.6 per cent overall rate of return (17.8 per cent real) it is really not surprising that Tryggvi Tryggvason, chief investment officer of Iceland’s Gildi pension fund, is feeling pretty pleased at the moment.

Respondents to our latest quarterly survey have revealed a lacklustre attitude towards SRI, while there is a buoyant attitude towards European and Nordic equities. However, US stocks have fallen out of favour. Marjolijn Roepers and Chris Newlands report

Finland’s largest mutual pension insurance company logged an impressive year-on-year return growth with a shift towards equities. And with recommendations being accepted to raise the equity component of the fund by 10 per cent, this could well be repeated again. Reeta Cevik reports

Unlike most Danish funds, which operate under minimum guaranteed return conditions, PensionDanmark is free to follow a long-term investment strategy with considerable exposure to equities. Reeta Cevik reports on the underpinnings of the fund’s success

nrpn spoke to four Norwegian investors about their current and future concerns

Norway’s government pension fund – foreign, formerly the petroleum fund, has just reported a 2005 return against benchmark of 1.1 per cent and now has assets of nearly NKr1,400bn (€175bn). Liam Kennedy spoke with Knut Kjær, executive director at Norges Bank Investment Management, which manages the fund, about internal restructuring aimed at separating alpha and beta returns, and about keeping costs within benchmark while selecting the best possible alpha generators

Although alpha-beta separation has been heralded as a common sense approach and one that works, many of the smaller institutions are still reluctant to make the jump and are scouting how the big fish fare. Chris Newlands reports

Norway’s NKr200bn (€25.14bn) Storebrand Asset Management introduced alpha-beta separation throughout its investments in 2003 and has been developing the process ever since. Storebrand’s clients include Gjedsidige Forsikring, a Norwegian property and casualty insurer, Storebrand’s largest external investor.

Norway’s Statens Pensjonsfonds – Utland (SPU) (formerly the state petroleum fund) last year implemented an alpha-beta separation strategy for its equity holdings, hard on the heels of a similar strategy implemented in the fixed income area several years ago.

Sweden’s AP 7, the Seventh National AP fund, with assets totalling €6.4bn, started applying alpha beta separation within its investments in November 2005.

ATP, Denmark’s DKr365bn (€48.94bn) labour market supplementary pension scheme, introduced alpha beta separation within its portfolio gradually over the course of 2005. The strategy now covers all of its investments except for Danish equities and a few other smaller mandates.

Despite the view that as Eastern European markets have stabilised, the traditional investment targets have become less interesting, EU accession countries are expected to step up their game – particularly Poland and Hungary – as monetary union looms, and Russia and Turkey continue to improve performance at an impressive rate. Reeta Cevik reports

With European Union accession granted to Estonia, Latvia and Lithuania, and with Economic and Monetary Union round the corner, the Baltic states are increasingly seen as a viable market in which to invest. Tomas Hildebrandt of Evli Investment Management looks at the growing domestic investment market and opportunities for foreign investment

Despite being rocked by the Livedoor scandal and with a reduction in return expectations for the coming six months, a poll of Nordic pension and insurance funds has shown Japan to be a most favoured destination for investment. Chris Newlands reports

When we talk about shareholder activism, terms such as ‘value’ are often bandied about as a reason to ruffle the feathers of companies who violate SRI issues. But performance is usually quoted as an excuse to avoid investing responsibly.

In Sweden, however, the case for engagement is raising its head.

In spite of ever-increasing pressure in the custody market, small niche players will survive to provide the kind of service that the global giants cannot – it is the middle sized players that have most to worry about. Christine Senior reports

Capital securities provide attractive incremental yield compared with industrials, as well as sound credit ratings and minimal event risk. And as recognition of this asset class continues to grow, Nordic investors are likely to want a piece of the action, says Anthony Biddulph, senior relationship manager for the Nordic countries at Merrill Lynch Investment Managers

Nigel Storer, head of institutional business development – Europe at Aberdeen Asset Management, explains how active investment managers are employing long/short techniques and allocating to European high yield bonds, emerging market debt and Asian fixed income in order to add value