ICELAND - Two regional Icelandic pension funds are close to finalising a €500m merger agreement.
The talks, between the Lifeyrissjodur Sudurlands and Vesturlands Lifeyrissjodur, the Southern and Western provincial pension funds, are the latest of a series of consolidations as the Icelandic pensions sector pursues economies of scale.
Vesturlands’ managing director and CIO Gylfi Jónasson told IPE the merger had been agreed and was now being considered by both boards of directors. If both funds’ members approve it the merger could be completed by the end of the year.
Jónasson said that the details of a merged fund’s asset management arrangements had yet to be decided. “We have managed most of our assets in-house, we are a fairly conservative fund in that our investment strategy is about 70% bonds and 30% equity, which sets us somewhat apart from our colleagues although our long-term rate of return is well above the national average.”
“The political decision has been made, the political will is there,” Jónasson added. “Now we will sort out the details. But the participant pool and the set up of the funds are very similar.”
Sudurlands is the result of a merger earlier this year between two other regional funds - Sudurnes, which covered employees at Keflavik Airport and the surrounding area - and Sudurland, which included workers in the south coast of the country.
Earlier this year, unskilled workers’ scheme Framsyn and the seamen’s fund Sjomanna merged to form the €2bn Gildi.
The combination of the €327m Lifidn and the €250m Samvinnu is due to proceed on January 1.
In addition, a ballot on a union between open pension fund Almenni (€320m) and the doctors’ pension fund Laekna (€174m) is underway, with a decision expected next month.
However, an attempt to engineer the merger of two of Iceland’s largest pension funds - the €2.1bn Verslunarmanna, the country’s largest private sector fund, and the €596m Sameinadi, ranked seventh and itself the result of the merger of eight pension funds - failed earlier this year after months of negotiations.