Nordic region: Interview with Richard Gröttheim, AP's outgoing CEO

Looking back at the 22 years he has spent at Sweden’s public pension fund AP7, outgoing CEO Richard Gröttheim says he is proud to have been part of the team building a default option that stands up to scrutiny and international comparison.

“One thing I can say I am proud  of is that we have created this world-class option with a broad global equity portfolio with a life-cycle or generational profile. We have also been able to reduce fees from 15bps to 5bps.” 

In a nod to AP7’s credentials, Germany’s minister of finance, Christian Lindner, visited the fund’s Stockholm office in September to learn more about the Swedish system, and by all accounts was impressed. Over the years countries, including most recently Luxembourg, have also looked at how a funded system might work in a bid to move away from a purely pay-as-you-go scheme.

Gröttheim views his roles as CEO and deputy CEO since 2000 with great humility for the trust shown in him because of the importance of the premium pension system, which for many will be a lifeline in retirement. 

Long-term view

Gröttheim emphasises the importance of having a long-term perspective. “As an example, in 2011 we had the European debt crises, right after we had introduced leverage into the fund. The market fell by 25% and AP7 by even more. If you look at a chart over this time period, what at the time felt very tough, as we were under enormous pressure, was just a ripple. This I will take to heart, that having a long-term strategy when managing pensions is key,” he says. 

During tough times it becomes even more important for a person in a role such as his to clearly communicate and stick to the long-term strategic goals, irrespective of media headlines.

 AP7 was one of the pioneers in 2000 when it created ‘black lists’ of companies it would divest from, and Gröttheim hopes he has contributed to bringing sustainability into asset management. “Over the past 20 years sustainability has become more mainstream but also more competitive, which is why AP7 has a team of four, headed by Johan Florén, focusing on sustainability issues. 

AP7 is also known for litigation, an avenue that Gröttheim says the fund follows to take a stance, particularly in the US. “This is one of the tools we have at our disposal to put pressure and change corporate behaviour and culture. It is generally not so much about the money but more about forcing change,” he adds. 

One prominent case was in 2020 against Google parent company Alphabet, which AP7 accused of trying to sweep sexual harassment cases under the carpet. Alphabet eventually reached a settlement with the fund in 2020 and undertook to invest $310m (€300m) to improve diversity and inclusion at the tech behemoth. 

In the past five years, Gröttheim and his team have also been lobbying for the relaxation of the investment guidelines governing its strategy. A law to expand its investment options has reached its final stages and is part of a broader reform of the premium pension system. The new rules will mean that AP7 can invest in illiquid assets and introduce a sustainability goal, which the government hopes will contribute to the climate transition, and will come into force on 1 January 2023. 

Gearing up for alternatives

AP7 has been building up its competence and resources for investing in real estate and infrastructure. Gröttheim is pleased that the fund will be able to diversify its investments further and thereby create better products for savers. AP7 is conducting an asset liability study to be ready to include illiquid asset classes, which will enable the fund to weather market turbulence better, he says.

“ In 2011 we had the European debt crises, right after we had introduced leverage into the fund. The market fell by 25% and AP7 by even more. What at the time felt very tough, as we were under enormous pressure, was just a ripple. This I will take to heart – that having a long-term strategy when managing pensions is key”

Richard Gröttheim

As for the characteristics required to manage AP7, Gröttheim believes you have to be able and willing to take financial risk, and be comfortable with that, as well as having a passion for sustainability issues and being comfortable talking to the media to explain the purpose of a high-risk strategy within the context of the pension system. 

AP7 has hired executive search firm Novare to find Gröttheim’s replacement. He will remain in his role until April or May 2023, or until his successor has been appointed. 

Looking ahead, Gröttheim is planning to remain in the financial industry as an adviser and board member, hopefully with an international aspect to it, he says. In addition, he has been thinking about writing an easy-read book on pensions and investments for the average person, rather than investment professionals. “The idea is to have the AP7 story as the backbone and explain what you need to think about when it comes to pension savings and investments,” he explains, adding that he doubts it will be a best-seller but hopes he can educate and inspire a few people when it comes to their pensions and savings. The book will be in Swedish. 

Having spent 22 years helping to build an organisation that now manages SEK970bn compared with SEK15bn in 2000, it is perhaps unsurprising that Gröttheim actually has some building, or at least carpentry, skills. He plans to restart a hobby he has had little time for recently and start making furniture. If his book does not beat the Nordic noir best-sellers, maybe his furniture might one day rival that of the other Swedish furniture maker known for its blue and yellow warehouse-style showrooms.