Nordic pension funds cautious on growth prospects for 2016
The Ericsson corporate pension fund in Sweden and Denmark’s Industriens Pension cautiously expect to see economic growth characterising 2016’s investment environment and are considering the role China might play next year.
In an interview for IPE’s “On The Record” in the magazine’s December issue, Christer Franzén, CIO of Ericsson Pensionstiftelse in Sweden, said: “Our fundamental macro view is that 2016 will be a similar story to this year. Growth will be slow but positive.”
European stocks could be expected to catch up with the US if investors believe the European Central Bank’s quantitative easing (QE) would continue to work, he said.
“Emerging markets will continue to struggle, so we will not put too much faith in them,” said Franzén, who runs investment at the SEK18bn (€1.9bn) pension fund.
Morten Kongshaug, portfolio manager at Denmark’s DKK134bn (€18bn) Industriens Pension, said his fund was – on a fine balance – working on the assumption there would be economic growth globally next year.
The labour-market pension fund has two main scenarios for 2016.
“The first, to which we attach a 65% probability, is expansion of global growth and global liquidity,” he told IPE.
“In the risk scenario, with a 45% probability, the deflation we have experienced in various markets, including intermediate production, construction and commodities, will cause a recession.”
Industriens’s portfolio is not defensive on the whole, he said, as it is still slightly overweight risk assets.
“However, we are considering rotating our emerging market allocation to China,” he said.
Meanwhile, Franzén looked to China as a deciding factor for the fate of markets in the both the US and Europe in 2016.
“If China misses growth expectations, it might affect the US and EU stock markets negatively,” he said.
Renato Bottani, meanwhile, CIO of Fondo Pensione IBM in Milan, told ‘On The Record’ his fund had finally opted to give its investment managers more freedom.
“We have asked them to focus on a total-return target and to be completely independent from any benchmark,” he said.
The managers will be free to pick their own allocation between equity and fixed income.
“In equity, they will be free to decide which countries, sectors and companies they can invest in, provided the investments meet some ESG criteria,” Bottani told IPE.
“In fixed income, we have given them freedom in terms of duration and allocation between sovereign and corporate.”