Danish pension fund LD has awarded around DKK20bn (€2.7bn) of bond mandates, with existing manager Nordea Investment Management and newcomer Nykredit Asset Management taking on the lion’s share of the outsourced work.
LD, which manages a non-contributory pension scheme for Danes based on cost-of-living allowances for workers granted in 1980, put the bond mandates out to tender earlier this year.
Nordea Investment Management and Nykredit Asset Management have each won a large Danish and North European gilt-edged and mortgage bond mandate of around DKK9bn.
Claus Buchwald Christjansen, head of investment at the DKK53bn pension fund, said: “The decisive factor was not just a deep knowledge of the Danish and Northern European bond markets. The Danish managers are also in the top class internationally within risk management.”
Peter Kjærgaard, CIO at Danish mortgage bond specialist Nykredit Asset Management, said it was no secret the LD mandate win was very important to the firm and that the team had worked hard to get it.
“LD has run a very professional process, and they’ve been good at giving us feedback,” he said.
The reason Nykredit Asset Management won the contract was threefold, he said.
“First of all, there is the well-documented investment process we have, secondly the experience of the team and thirdly, our risk management process – both within the investment team, but also the risk-management set-up that surrounds that within Nykredit Asset Management,” Kjærgaard said.
Christian Hyldahl, head of investment at Nordea Investment Management, said the company was very happy to win its mandate.
He said while the asset class the company had been re-hired to manage was very well defined, primarily involving Danish mortgage bonds, what was unique about Nordea Investment Management’s investment process was that it did not apply any macros or overlays.
“We have a lot of focus on risk management, so we don’t have any large duration bets,” Hyldahl said. “The investment process is quantitative and risk-management-driven with focus on extracting alpha from securities selection.”
LD also awarded a short-duration bond mandate of just under DKK2bn to HP Fondsmæglerselskab, which Christensen described as a specialist manager with a very experienced team, even through he said it was not so well-known.
Foreign managers won the two global bond mandates, with Paris-headquartered AXA Investment Management taking on a portfolio of European investment-grade bonds of around DKK2.5bn.
New York-based Fischer, Francis, Trees & Watts won the smallest mandate of around DKK700m for global indexed bonds.
The contracts awarded all cover a four-year period starting as soon as possible, the pension fund said, adding that they could be extended for up to six years.
The total volume of the mandates is between DKK20bn to DKK23bn, depending on allocation decisions and members’ withdrawal of funds.
Christensen said that, for investment-grade bonds, it was important the manager have particularly strong skills in credit analysis and sector allocation.
He added that competition on both quality and price in the award process had been stiff.
“This led to changes in some of the appointments,” he said. “The tender was carried out according to EU rules, which only increased the competition.”
Nykredit Asset Management is replacing Maj Invest, and HP Fondsmæglerselskab is taking over from Nordea Investment Management.
Meanwhile, the mandate won by AXA Investment Management is a new one, replacing a fund investment.
Christjansen stressed that LD had been very satisfied with the results generated by the managers that had worked for the pension fund up to now.
In July and March this year, LD – which now outsources all investment management – awarded four equities mandates.