Alecta, Sweden’s biggest pension fund, has just announced sweeping changes to its equities strategy as it scrambles to regain customer confidence following March’s shocking losses on US bank investments.

In the first conclusions of the strategic review it launched in April after firing Magnus Billing, its chief executive officer, Alecta said in a statement this afternoon it will increase the number of stocks in portfolios backing both of its pension products, and in future have smaller stakes in non-Nordic companies.

Its signature active management will continue, the SEK1.2trn (€105bn) occupational pensions provider said, although some index management is likely to replace a portion of that on the defined-benefit (DB) side – the ITP 2 product.

The Stockholm-based firm’s investment strategy has come under intense scrutiny after it had to book losses of SEK19.6bn on investments in Silicon Valley Bank, Signature Bank and First Republic Bank during the US bank crisis in March.

Ingrid Bonde, chair of Alecta’s board, said: “Confidence in Alecta has been negatively affected by the losses in the American banks in March.

“With these proposals for changes, we are learning from the spring’s events, adapting the model to higher volumes and laying the foundation for continued high returns and adapted risk for our different categories of customers,” said Bonde.

Because Alecta was a major player in the pension system and in the capital market, the firm said, the decisions needed to be implemented “in an orderly manner over a longer period of time, taking into account the preservation of values and ensuring continued good returns on the future pension capital”.

For this reason, it said, exact details would not be communicated in more detail.

On the defined contribution (DC) side, Alecta announced it would continue with active management behind the Alecta Optimal Pension product offered within Sweden’s ITP 1 occupational pensions scheme, but that the equities portfolio would contain more companies in future, and have smaller stakes in non-Nordic companies than currently.

On the DB side, the ITP 2 product – which accounts for most of its assets but is closed for new contributions – Alecta said the product had a greater need for stability.

“This means that the focus on the management of the portfolio will change in the future,” the provider said, adding that the board had tasked management with analysing this autumn what such a portfolio should look like.

Alecta said it would conduct an in-depth analysis of the DB management model, which would probably mean supplementing active management with index management.

As with the changes to be made on the DC side, the DB product’s actively-managed equity portfolio will contain more companies, with lower ownership stakes in firms outside the Nordics, Alecta announced.

Alecta has been known for its equities strategy of maintaining a very concentrated portfolio with some SEK480bn invested across around 100 stocks. This aspect of its strategy, along with Alecta’s targeting of foreign stocks, has come in for particular criticism following revelations of the US bank losses.

But in today’s announcement, Alecta said that because Alecta Optimal Pension – which corresponds to about 20% of its total assets under management —  was a product with a very long time horizon and high returns in focus, it would continue with current active equities management with concentrated holdings.

”However, it will take place with lessons learned from what happened in March 2023,” the firm said. ”The active management will have a downwardly-adjusted risk with an increased number of companies and lower ownership shares in companies outside the Nordics,” it said.

A week ago, Alecta appointed a new permanent CEO in Peder Hasslev, chair of Denmark’s PFA. He is due to start the top job in September.

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