For many businesses associated with investment and finance, 2001 was far from memorable. Sweden was hit particularly hard but the consulting industry has shown itself to be relatively robust. The industry eased up a little in the first three quarters but according to Niklas Fahlstrom at Wassum, business picked up during the last quarter. “It was a little slow during the summer but we are very optimistic about next year’s prospects,” he says.
Consultants in Sweden are benefiting from many funds’ decision to review their allocations and place ever increasing proportions in global equities, a decision based on the fact that global equities are less volatile than Swedish equities. “Investors feel that they can increase their total equity share and that if they do it via global equities then it doesn’t change the risk profile,” says Fahlstrom.
On the investment consulting side there has been an increased demand for advice on investing in alternative investments, particularly hedge funds and private equity. At the fore is the AP7 fund who last year appointed the US consultant New England Pensions Consultants to run a search for a hedge fund of funds manager.
An interesting development in the market was the purchase by Deloitte & Touche of MPIR, a small, local investment consultant. D&T already had 400 accountants in Stockholm but wanted an investment consulting department and MPIR still exists as an entity within the company. D&T says it has not been marketing the investment consulting side too aggressively since depressed markets mean funds are focusing on risk management.
Swedish markets have been hit particularly hard and managing director Peter Agardh says one consequence is an increased awareness of risk. “What is more important is the strategic asset allocation and we have received a number of assignments to review strategic asset allocations.”
One of the reasons behind the deal was that both sides had considerable interest in global investment performance standards (GIPS). Being an accountant, D&T was more involved in verification, MPIR more into the implementation and, prior to the deal, the two had a cooperative agreement whereby MPIR implemented and D&T verified.
In many ways the Swedish market is divided into two sectors. Most of the small local and highly competent consultants concede that for the large AP and pension fund mandates, it is extremely difficult to compete. “For the large international manager searches we don’t have the kind of international databases that the likes of Watson Wyatt and Mercers do. It’s as simple as that,” says Agardh. He says that up until now they have been unable to compete on the large ALM studies. MPIR and Wassum have the much the same kind of customer base, the local municipalities and small and medium-sized funds,” he says.
Wassum itself says that the decision by Mercers to close its investment consulting division in Sweden eased pressure on the small and medium sized mandates but that for the large mandates they are competing with the large international consultants. Wassum claims that a recent cooperative agreement with Hewitt will inject a little more credibility internationally. “We will share resources in a lot of research areas,” says Fahlstrom.
Last year Watson Wyatt moved its actuarial valuation process to Stockholm. Johan Fidenmark, head of benefit and investment consulting says that they are seeing a lot of demand for international accounting standards. This is in part due to the fact that it is required for foreign equity listings and that all quoted companies will be required to implement international accounting standards by 2003. Historically Swedish funds were not obliged to carry out ALM studies but the AP funds are now required to carry out one annually. “This is putting a lot of pressure on all the other funds,” says Fidenmark.
HPS/Towers Perrin also cites international accounting standards as a source of work. There is also, according to managing partner Ake Flintull, an increased awareness about retirement, in part due to the PPM system introduced in 2000. “Companies are increasingly aware of pension issues for their employees, particularly for their star employees,” he says. This is in turn leading to companies approaching consultants and seeking advice on plan structure and design.