AP1 re-tenders $4bn worth of emerging market equity mandates
Sweden’s AP1 is re-tendering its entire allocation to emerging market equities in a process that will see around $4bn (€3.3bn) of capital entrusted to a range of external managers.
The SEK333bn (€32.3bn) pension fund – the first of Sweden’s main four buffer funds backing the state pension – published the details on the EU’s tendering website, TED, last week.
Majdi Chammas, head of external asset management at AP1, told IPE: “This is a tender of an existing mandate – we are re-tendering the entire allocation.
“It is part of our process to challenge all the mandates we have every five to seven years, and this asset class was last tendered in 2012.”
The tender comes after a year in which AP1 bumped up its allocation to emerging market equities to just over 14% of the total portfolio, having begun 2017 with an 8% allocation.
AP1 said it will evaluate both active and passive strategies as well as different investment styles, such as fundamental and quantitative.
However, strategies solely investing in emerging market small cap or frontier markets were not part of the tender process and would not be evaluated, it said in the tender notice.
Global emerging market equities were currently managed by six external managers, Chammas said, but this could be changed depending the number of strong bids. “It could be one or it could be seven,” he added.
The fund pointed out in the notice that its sustainability policy applied to the entire fund, including externally-managed mandates, and that ESG would be a focus when selecting managers.
“In the evaluation process special attention will be paid to how the manager considers and integrates ESG factors in the investment process,” the pension fund said.
Managers responding to the tender must be able to document experience in management of institutional accounts for the specified mandate.
They must be able to show a live track record for the product offered of at least 12 months, and must also reserve capacity in the submitted strategy of at least $300m, it said.
The deadline for receipt of tenders or requests to participate is 29 June.
AP1’s chief executive Johan Magnusson said in the pension fund’s 2017 annual report that the fund had extended its EM investments during the year, as it deemed opportunities for returns to be better in these markets than in developed foreign markets, which it said were currently characterised by high valuations.