Over his 40-year career in pensions so far, Lars Wallberg has seen profound changes in Denmark’s pension system
After 40 years in the Danish pensions sector, Lars Wallberg has some words of advice to people just embarking on such careers.
“Never forget that it’s other people’s money and financial safety you have under your management,” he says in an interview with IPE at Velliv Foreningen in Ballerup, where he has been chief executive officer for the last nine years.
Wallberg is now set to leave the organisation, a financial and philanthropic association, which is the sole owner of Danish pensions firm Velliv, and in turn pays bonuses to Velliv’s customers.
Before coming to Velliv Foreningen in 2017, Wallberg spent nearly 12 years as chief financial officer of the pension fund Lønmodtagernes Dyrtidsfond – part of the organisation now known as LD Pensions (LD Fonde) and based in Frederiksberg.
Over his career so far, he has seen profound changes in Denmark’s pension system, which is regularly ranked among the top three such systems in the world for aspects such as its funding levels and provision of adequate benefits.
“Forty years ago, I was a young student at the University of Copenhagen finalising a master’s thesis that was addressing the Danish pension system,” he says.
“At the time, neither I nor anyone I knew would have believed we’d be able to have a pension system where manual workers would be setting aside more than 10% of their income for retirement. That was a huge achievement, and it’s one of the main reasons why the Danish economy is so solid,” he says.
Looking back at his time leading Velliv Foreningen, Wallberg is proud of three major pieces of work his organisation has seen through.
“In my time as CEO, we became the sole owners of Velliv. We acquired it over two years, and that was a complex and large transaction – we invested more than DKK6.6bn in the share capital.
“Maybe it’s time to give something back to society”
Lars Wallberg, CEO of Velliv
“We started our organisation with a total capital of DKK8bn, and at present, about 80% of that is invested in Velliv and the rest, 20%, is invested in our own portfolio.”
He adds: “The acquisition of Velliv was a very large part of my job in the first couple of years, and the good thing is that Velliv has had a lot of commercial success under our ownership; it has grown quite significantly when it comes to the number of customers and premium income.”
Another large project was establishing a bonus scheme for its members a year after Wallberg took up his job.
“That has given our members nearly DKK2.4bn over the years, mainly because of the commercial development of Velliv,” he says.
Then in 2018, Velliv Foreningen began its philanthropic donations and grants, which have always focused on mental health in the workplace.
As CEO, the Velliv Foreningen Wallberg’s investment role has been more about setting the strategy and getting approval from the board, since the association has an investment manager to handle the day-to-day asset management.
“We try to stick rather closely to our allocation and not do too much trading between the funds we are invested in, because we don’t believe we can time the market in any meaningful way,” he says.
The portfolio has a strategic allocation of 25% to alternatives, 40% to equities, 25% to investment-grade bonds and 10% high-yield bonds.
“We have deviated from it from time to time, both because the markets have moved and because we have taken positions on it.
“At present we are about 20% in alternatives, but we’re increasing that because of the new investments we’re making – including a couple of impact funds we have committed to in the last year.”
He describes Velliv Foreninen as an ambitious and active owner of Velliv, but one with an arm’s length approach and influence that lies primarily in selecting the board.
Wallberg believes the ownership model has contributed to the success of Velliv, in part because the fact that customers can be co-owners and have an influence has been positive for the image of the pension provider.
“As a long-term owner, we can also be patient – because we don’t have short-term requirements for dividends – allowing the company to invest in product and digital development and without too much short-termism in our requirements,” he says.
“It’s a long-term business and it should be treated that way too, because investing in new pension products and the IT that is required for that is something that takes years and years of investment,” the CEO says.
Velliv Foreningen’s portfolio gives it more leeway as an owner too, because it has a contingency reserve that can be used to fund customer bonuses in years where Velliv might need to invest more in its own business.
“That’s combined with the fact that in our listed portfolio, we have a focus on being Paris-aligned and also investing in high-yield bonds that are climate-friendly or at least working to reduce CO2 emissions,” he says, and singles out Velliv Foreningen’s impact investments as a particularly interesting activity.
“Our overall portfolio profile at Velliv Foreningen is focused on sustainability in the broader sense of the word, and especially when it comes to impact we are looking at climate but also at social impact investments - which are hard to find, but we have found a couple of funds that fit the profile.
“Our overall portfolio profile at Velliv Foreningen is focused on sustainability in the broader sense of the word”
“In the last year we’ve invested about DKK75m in impact investments – private equity and venture capital – because we believe that regardless of the geopolitical headwinds we should help to improve the ability of small and medium-sized companies’ ability to work with sustainable products and services while achieving a positive social impact, and we also believe we can make a solid return there,” he says.
Those impact investments include DKK50m in Danish social impact fund Den Sociale Kapitalfond, and DKK25m via Copenhagen-headquartered The Footprint Firm.
When he leaves Velliv Foreningen at the end of February, Wallberg plans to use his network to find roles where he can put his very long and broad experience to good use as a board member or adviser to companies or organisations.
“I think I can contribute something, and some of it will be pro bono,” he says, adding that many NGOs and smaller organisations are looking for board members but lack strong enough finances to pay them.
“I’m open for business,” he says, adding that he is planning to sharpen his board skills at IMD Business School in Switzerland over the next year.
“It’s been a privilege both financially and intellectually to have been in the financial industry and now in the philanthropic sector for nearly forty years – so maybe it’s time to give something back to society,” says Wallberg.
