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Exclusive: Swedish pension fund Apoteket overhauls asset management model

Exclusive: Swedish pension fund Apoteket overhauls asset management model

Apoteket AB:s Pensionsstiftelse, the pension fund for employees of the Swedish state-owned pharmacy chain, will replace its internally-managed active portfolio with largely index funds, Modern Investor can reveal.

The €1 billion scheme’s incoming CEO, Gustav Karner, believes that it is not feasible for a small Swedish fund to have an in-house stock picking model because it is very difficult to beat global markets.

‘We are planning to shift from in-house stock picking to index funds mainly because I believe in cost efficient solutions because it’s very hard to beat the market after fees, especially for a long-only fund,’ Karner, who will assume the position of CEO in May this year, told Modern Investor.

He added that in his opinion it was challenging to beat foreign equity markets.

The scheme’s allocation to asset classes other than equities will also be overhauled. It's bond portfolio – currently managed internally – will be assigned to external asset managers to be manged in an ‘index-like’ fashion.

However, for more specialised asset classes, Karner revealed he will look to appoint active mandates.

‘I think it’s difficult for a small Swedish investor to beat the US or Asian equity market, for example. I will probably use active funds for emerging markets and small and mid-cap equities.’

He added that he wanted to find the best, robust, asset mix to fulfil the long-term goals of the fund.

'We want to find, and be able to invest with, the best asset managers, primarily in the alternative space.'

According to the Apoteket’s annual report for FY 2015, it had 18% of its portfolio invested in Swedish equities and 7% in foreign equities. Bonds and cash comprised 52% of the portfolio, high yield – 11%, alternatives – 9% while 3% was invested in real estate.

Karner added that upon his arrival to the pension fund he wants to fully understand its liabilities and implement ‘a state-of-the-art’ portfolio management and risk system.

Apoteket announced the appointment of new CEO in November last year. Karner comes to the fund from The Nobel Foundation, which was established in 1900 to manage Alfred Nobel’s fortune to ensure a secure financial standing for the Nobel Prize over the long term.

Prior to serving as CIO of the foundation for five years, he was CFO and Head of Asset Management at insurance company Länsförsäkringar, which is made up of 23 independent insurance companies throughout Sweden and manages around SEK 120 billion (€13 billion). Before that, he was head or risk management at Sweden’s largest pension fund Alecta.

The Nobel Foundation told Modern Investor they had no information to communicate regarding a replacement for Gustav Karner and he was to remain at the foundation until May.

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