Despite market jitters over valuations of US equities given the new administration’s trade and other policies, large pension funds in the Nordic region tell IPE they are not reducing strategic allocations to US shares at this point — though some tactical selling has been done.
At Varma, Markus Aho, chief investment officer and deputy chief executive officer, said the €64bn Finnish pensions insurer reduced its tactical allocation to US equities and exposure to the US dollar in the first quarter of this year.
“This was in response to general uncertainty and increased downside risk probabilities rather than for single specific reasons,” he told IPE.
The Helsinki-based pension provider reduced its allocation to North America within the listed equities portfolio by six percentage points — to 43% from 49% — during the quarter.
“The allocation changes implemented so far are tactical – as opposed to strategic – in their nature,” he said.
In Denmark, new data from the central bank show that in the first three months of this year, pension and insurance companies became net sellers of US equities for the first time in two years.
US equities still made up the lion’s share of their total listed share portfolios, worth DKK1.3trn (€174bn), at 53% at the end of March, compared to 29% for European equities.
But together, the Danish institutional investors made their largest quarterly purchases of European shares since at least 2018 in the first quarter at DKK21bn, while selling DKK5bn of US stocks.
Commenting on the market volatility affecting markets this year, Aho said that despite the speed of some movements, the total magnitude of market movements has been modest so far. “Whether the situation has changed in ways that lead to more substantial market movements is for anyone to judge,” he said.
“Days and weeks of great volatility are times to focus on tactical things and risk management, but perhaps not the time to make big strategic shifts,” he added.
“People have a tendency to focus on and overreact to short-term headlines that end up being noise in the long run. At the same time, there is a risk of missing the bigger and slower-moving fundamental changes,” Aho said.
“In many ways, it is still early to make a final long-term judgement on potential fundamental changes in the world order,” the Varma CIO continued.
Meanwhile, fellow Finnish pensions insurer Elo has kept its US allocation steady for both equities and bonds despite the drama and uncertainty characterising the initial phase of Donald Trump’s second presidency.
“We haven’t made any major changes to our allocation,” said Jonna Ryhänen, CIO and deputy CEO of the €32bn pensions firm, adding: “We obviously are monitoring the situation very carefully.”
“We see that there are attractive investment opportunities in US markets in the long run,” said Ryhänen, adding: “Good companies can adapt and survive in different kinds of environments, whoever the president is”.
Sweden’s largest pension fund, AP7 – whose SEK1.44trn of assets are mainly invested in equities – has not changed its allocation to US equities this year, according to CIO Lena Fahlén.
“AP7’s equity fund consists largely of a global index portfolio where we normally do not make major reallocations,” she said.
“However, we are closely monitoring geopolitical developments and are concerned about the uncertainty that currently prevails around US trade and fiscal policy,” she noted.
“The uncertainty risks dampening investment and consumption,” Fahlén remarked.
Similarly, in Norway, municipal pensions giant KLP has not made any changes to US securities in the portfolio, according to Harald Koch-Hagen, senior vice president for risk management and allocation at the NOK1.15trn (€100bn) institution.
“KLP is a long-term investor with a robust investment strategy,” he told IPE, adding: “Our portfolio is well balanced across different countries, sectors and individual securities to spread the risk”.
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Rachel is IPE's Nordic correspondent.
She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere.
In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile
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