ATP: Steady as she goes for ATP
The announcement of Christian Hyldahl as ATP’s new chief signals a steady-as-she-goes approach in turbulent financial times, at the same time as a strong focus on operational efficiency for the giant Danish labour market pension fund.
Hyldahl brings considerable knowledge of capital markets, having been head of Nordea Markets until 2011. He also takes credit for increasing external assets under management, managing costs and developing the profile of Nordea Asset Management, where he was CEO from January 2015, following a stint of almost four years as head of investments.
As CEO of ATP he will need to maintain the reputation of the organisation as skilled and competent, while at the same time being modest and decent – two adjectives used by ATP chairman Jørgen Søndergaard following Hyldahl’s appointment.
“Christian Hyldahl is a skilled and respected finance professional and has in-depth knowledge of the financial sector. He is characterised as a leader of high integrity and great judgement,” Søndergaard said in a statement.
In an interview with IPE shortly before his appointment at ATP, Hyldahl was keen to focus on the cost and efficiency improvements at Nordea Asset Management under his watch. “The focus has been on an efficient platform and a lot of focus on making sure we have a very efficient set-up and a low cost-income ratio,” Hyldahl told IPE.
Hyldahl also takes credit for building up external institutional and wholesale business to its current level of about 40% of total AUM. “The development of Nordea Asset Management has been to break through the glass ceiling of becoming a European asset manager, not just being a bank-owned Nordic asset manager,” he added.
Nordea Asset Management’s AUM was up 9% in 2015, with costs up just 6%; overall the cost-income ratio is 31%, considerably lower than the 40% level asset managers see on average, according to consultants like Oliver Wyman.
This will have counted in Hyldahl’s favour given ATP’s position as an efficiently-run and frugal organisation. ATP says it is one of the most cost-effective pension funds in the world, having administration expenses of just 4bps in 2016, 24% lower than in 2012.
ATP is probably best known internationally for its innovative approach to investment, using a risk-based asset allocation strategy. Some 85% of its DKK806bn (€108bn) portfolio is run in-house and its return-seeking portfolio generated returns of 14.3% over three years as of August this year, ahead of the return target of 9%.
Domestically, ATP is highly visible and operationally complex, counting some 5m Danes as members, with just shy of 1m receiving pension benefits. Over the years, ATP has also assumed responsibility for administering and paying out several key state benefits, including the state pension, under its unit Udbetaling Danmark (Payments Denmark). Its processing business now pays out more than DKK200bn annually.
ATP was created under Social Democrat prime minister Jens Otto Krag’s government in 1964 on the back of concerns that the basic pension, the folkepension, was too great a burden on the state. Since then, Arbejdsmarkedets Tillægspension, or the Labour Market Supplementary Pension Scheme, has become a pillar of Danish society both financially and symbolically.
Denmark’s largest pension fund and Europe’s fourth largest, ATP is established as an independent, self-owned institution under a special act of parliament.
The fund was caught up in a storm of political, public and business demands that came to a head nearly two years ago over its investment in DONG Energy.
ATP’s public pronouncements reflect a commitment to public service. Its staff are aware that they are the guardians of the savings of all Danes. As such, ATP feels it is important to communicate reassurance and competence.
Hyldahl’s appointment comes just two months after the public announcement of Carsten Stendevad’s departure as CEO of ATP.
Stendevad was hired in 2012 after a head hunt in which ATP had said it was specifically looking for someone with an international outlook. He certainly fitted the bill, having spent more than a decade working in New York, latterly as a managing director for Citi’s investment bank. He returns to the US for family reasons.