Gildi, Iceland’s third biggest pension fund, has called on the government to change the country’s takeover rules to increase the protection of smaller shareholders.

Árni Guðmundsson, chief executive officer of the ISK661bn (€4.2bn) pension fund, wrote to the Ministry of Finance and Economic Affairs asking it to consider revising the rules concerning mandatory takeover offers, so that in future a controlling shareholder would have to repeat an offer if they passed a 40% or a 50% ownership threshold.

Such a change would introduce up to two additional thresholds, compared to current local legislation which stipulates a single threshold of 30%.

“Circumstances that have arisen in recent months in the Icelandic securities market led the fund to take a closer look at the rules of Icelandic law on takeovers and takeover bids, and comparisons with comparable rules in neighbouring countries,” the pension fund said, adding that law firm ADVEL had helped with the work.

Gildi said there were examples elsewhere of rules requiring controlling shareholders to make repeat offers, and that having such rules in Iceland would significantly increase the legal protection of minority shareholders.

Smaller shareholders could be better protected, for example, in situations where the bid price had been unacceptable, or where the offeror had stated at the time of the bid that they did not intend to increase their ownership level, Gildi said.

LV makes 13% Jan-Nov investment return

In other news, Iceland’s second biggest pension fund, the Pension Fund of Commerce (Lífeyrissjóður verzlunarmanna, LV) reported a 13% return for the first 11 months of the year, with foreign equities in particular contributing to the strong result.

In real terms, the gain on its investments from January to November was equivalent to 9.2%, the fund said in a report on its website.

The asset class producing the highest return in the period was foreign equities, which generated 7.8%, followed by domestic bonds with a 1.8% return, according to the report.

Meanwhile, contributions to the fund had increased by 13% and the number of scheme members was up 8% since the end of last year, LV said.

The proportion of shares in LV’s portfolio rose during the year to 55.4% at the end of last month from 54.4% at the end of 2019, with the bond allocation shrinking accordingly, to 44.6% from 45.6%, the fund said.

The proportion of foreign assets rose to 43.6% from 39.5% over the same period, it said.

According to its investment plan for 2021 – which LV said was no major change from 2020 – the weightings of both shares and foreign assets are set to tick higher next year, with targets of 55.6% and 45%, respectively.

LV said net assets rose to ISK975bn by the end of last month, from ISK850bn at the end of 2019.

Frjálsi diversifies foreign investment portfolio, Almenni ups equities in low-risk option

Frjálsi outlined its investment policy for 2021, saying it aimed to increase the proportion and diversification of foreign assets, reduce the weighting of domestic assets and increase the pension fund’s bond portfolio risk.

Overall, the fund said it would continue on the same investment path of the last few years.

Meanwhile, pension fund Almenni said that as part of its 2021 investment policy review, it had decided to increase the equities weighting in its low-risk Life Portfolio III investment plan to boost long-term returns.

The proportion of shares in the portfolio would rise to 30% from 20% and the ratio of bonds and deposits would fall to 70% from 80%, it said.

“Interest rates have fallen sharply in recent years and the investment environment has changed significantly since the current investment policy was formulated,” Almenni said.

The real yield on long-term government bonds fell to below 0% earlier this year from 5% when the portfolio was established in 1998, it said.

“This sharp reduction in interest rates in recent years has resulted in a considerable exchange-rate gain for the portfolio, but if we look ahead, bonds will probably yield lower returns than they have,” Almenni said.

Looking for IPE’s latest magazine? Read the digital edition here.