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AP2 to drop external managers after ALM study

SWEDEN – Sweden’s €14.4bn AP2 fund has put out a tender for a consultant actuary to undertake a new ALM study to determine its long-term investment strategy. According to AP2, some of the external managers’ contracts will be terminated as the study will lead to some of the assets being managed inhouse.

Tomas Franzén, head of asset allocation says: “though the primary reason for the ALM study is give us an accurate picture of the fund’s long-term liabilities and their impact on its investment strategy, the results will definitely lead to an asset allocation study that will determine how much we can manage inhouse and how much will continue to be outsourced.”

Franzén says that the fund’s initial strategy to outsource its entire asset base is now obsolete. “When the fund was set up, we didn’t have any level of internal asset management capability. But that has changed. We are now ready to start managing some of the assets internally. But changes of this nature take time and moving to a balanced internal/external management structure will be a gradual process.”

Franzén stresses that AP2 is not unhappy with any of its current managers, which he declined to name, but that the study means some will be dropped. “It is inevitable that there will be manager changes. But these will be nothing more than the result of building an inhouse management team, and not a reflection on the performance of the managers we currently use. There have been no decisions yet about how the new investment strategy might shape up,” he explains.

The tenders for the ALM study should reach Franzén at AP2 by March 01. AP2 stipulates that any interested party must be able to complete the ALM by mid-May. He says AP2 would then be free to implement any asset allocation changes the ALM might recommend.

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