Welcome to the third edition of Nordic Region Pensions & Investment News,Financial Times Business' dedicated publication for the pension and investment industries in the Nordic countries.

In this edition we take a look at the property markets and our cover feature examines the growing trend for Nordic investors to shift their real estate assets abroad.

Velkommen til 3. udgave af “Nordic Region Pensions & Investment News”, specialpublikationen fra Financial Times Business for pensions- og investeringsmarkederne i de nordiske lande.

I dette nummer ser vi på ejendomsmarkederne, og vores forsideartikel beskæftiger sig med den stigende tendens for nordiske investorer til at flytte deres faste ejendomsaktiver til udlandet.

Tervetuloa lukemaan Financial Times Business -yhtiön Pohjoismaiden eläke- ja sijoitustoimialoille suunnatun ammattilaisjulkaisun kolmatta numeroa!

Pääartikkelissamme tarkastellaan Pohjoismaisten sijoittajien trendiä siirtää kiinteistösijoituksiaan ulkomaille.

Hajautuksen tavoittelu sekä paikallisten kiinteistömarkkinoiden tuottojen heikkeneminen on pakottanut eläkesäätiöitä muuttamaan ulkomaille. Tämä kehitys on huomattavissa myös IPD:n Pohjoismaisessa kiinteistöindeksissä, joka on viime aikoina pudonnut vuoden 2000 16, 1:sta prosentista 6,6:een prosenttiin (v. 2004).

Velkommen til tredje utgave av pensjons- og investeringsnyheter for nordisk region, Nordic Region Pensions & Investment News, en dedisert publikasjon fra Financial Times Business for pensjons- og investeringsindustrien i nordiske land.

I denne utgaven kikker vi på eiendomsmarkedet og vår omslagsartikkel setter søkelyset på den økende trenden blant nordiske investorer til å flytte fast eiendom utenlands.

Välkomna till det tredje numret av Nordic Region Pensions & Investment News, specialtidskriften från Financial Times Business för pensions- och investmentsektorn i de nordiska länderna.

I det här numret tittar vi på fastighetsmarknaden, och vår huvudartikel granskar den växande trenden hos nordiska investerare att flytta sina fastighetstillgångar utomlands.

Nordea Life & Pension, which has a total real estate exposure of E2.9bn, is to increase its allocation to overseas property from E125m to E1bn.

Hedgenordic has launched the first hedge fund index in the Nordic region, which monitors hedge funds in Sweden, Denmark, Norway and Finland and provides a database of fund returns.

Jan Andersen, CEO of Hedgenordic, told nrpn that the new hedge fund regulations in Norway and Denmark provided an excellent opportunity for launching the service.

Danske Capital Sverige has overhauled its approach to Sweden's Premium Pension system (PPM). The company has launched three fund-of-funds products while withdrawing its European SRI screened equity product, First Nordic SRI Europe.

Norges Bank Investment Management (NBIM) is developing new strategies to strengthen its guardianship of the government's Petroleum Fund and foreign exchange reserves.

Several Norwegian-based multinational companies could transfer the regulatory domicile of their pension funds to EU countries, nrpn has learned.

Per Simonsen, senior supervisory advisor from Kredittilsynet, the Norwegian Financial Supervisory Authority, said that the motivation to move was most likely prompted by the desire to pool assets.

“From the asset management and investment perspectives, it can be beneficial for a multinational company to assemble its pension funds into a pan-European one,” he said.

Aberdeen Property Investors has attracted an additional E44m to the second closing of Aberdeen Indirect Property Partners (AIPP), Europe’s first pooled pan-European property fund of funds. The fund’s total committed capital is now at E205.5m. The fund has made three investments into property funds totalling E75.5m in equity since its launch in February 2005.

The Swedish state funds AP1, AP2, AP3, AP4 and AP7 all posted returns in excess of 10 per cent for 2004, although their overall performance was considerably down on the previous year.

Denmark and Norway have both announced the introduction of a new regulatory framework for hedge funds. The Danish framework came into force on 1 July 2005, with its Norwegian counterpart set to follow suit before the end of the year. Regulators plan to harmonise the Nordic hedge fund market and pave the way for further growth.

A study by KPMG and UK think-tank CREATE has concluded that the next wave of new money into hedge funds will come from pension funds.

Analysing the views of 550 top executives in 35 countries, the study revealed that pension funds' allocation to hedge funds is on the increase. In a global perspective, however, the total allocations made into hedge funds will remain small – less than three per cent of total investments on average.

VER, the E7bn Finnish State Pension Fund, has announced a move into property funds. At present, 40 per cent of the fund’s holdings consist of equities, and the remaining 60 per cent of bonds.

Timo Löyttyniemi, managing director at VER, told nrpn that in the first half of 2005 it had hired an alternatives specialist and committed to two different property funds.

VER, the E7bn Finnish State Pension Fund, has announced a move into property funds. At present, 40 per cent of the fund’s holdings consist of equities, and the remaining 60 per cent of bonds.

Timo Löyttyniemi, managing director at VER, told nrpn that in the first half of 2005 it had hired an alternatives specialist and committed to two different property funds.

Storebrand Life has appointed Malin Björkmo as managing director of its Stockholm branch, which is to open in September. Ms Björkmo joins Storebrand from Skandia Liv, where she was the head of asset management.

Finansinspektionen (FI), Sweden’s financial regulator, plans to implement a traffic-light solvency system in January 2006 to manage investment risks in the life insurance sector. A beta version of the system has already received plaudits from Sweden’s life insurance sector, although doubts remain in some quarters on points of detail.

• The traffic-light system is a tool designed to make sure that life insurance companies and pension funds manage their investment risk and follow the prudent person principle, set out in the pan-European pension fund directive.

Finansinspektionen’s reforms are set to trigger a migration among Sweden’s pension funds from equities to bonds, at a time when the National Debt Office is cutting debt maturity, writes Chris Newlands

Norway’s life insurers are waiving fees and reducing charges in a bid to pick up business from companies about to be forced to pay at least two per cent of their employees’ salaries into an occupational pension scheme, says Tor Sydnes, partner at Wassum.

Iceland’s general worker’s fund (Framsyn Lifeyrissjodur), ranked third by assets under management, has joined forces with the country’s fourth-ranked seamen’s fund (Sjomanna Lifeyrissjodur) to form the Gildi pension fund.

From 1 June, the newly formed fund, with a total on current estimates of E1.92bn of assets under management, will occupy the former Framsyn fund’s third-place ranking.

A report by íslandsbanki has concluded that Icelandic pension funds are likely to invest heavily in bonds as the market continues to grow and funds reach the regulatory investment ceiling of 50 per cent of fund assets in equities.

Icelandic pension fund assets have grown by 316 per cent over the last 10 years. Current Icelandic regulations restrict equity holdings to 50 per cent of a fund’s total net assets.

As both the Swedish and Finnish Lutheran churches have discovered, managing an ethical investment policy is a demanding task. But the need to diversify their portfolios and increase returns, is leading both funds to consider new asset classes. Reeta Cevik reviews the situation facing these two socially responsible investors

Sweden’s Premium Pension system (PPM), launched in 2000, will undergo a revamp this October. The ministry of finance has nominated Professor Karl-Olof Hammarkvist of Stockholm School of Economics to draw up proposals to reform the system. nrpn talks to Prof Hammarkvist, PPM’s director Catrina Ingelstam, and secretary general of the Swedish Association of Institutions for Retirement Provisions, Alf Guldberg, about the key issues facing the PPM; how the system could be improved; why foreign funds have proved so unpopular, and why average investment returns have been as low as -8 per cent since the system’s launch.

With returns on more traditional asset classes mired in the doldrums, Nordic investment managers have shifted their focus to developing an overseas property portfolio in a bid to increase yields and spread risk away from exposure to a single domestic market. Chris Newlands investigates

‘Safety in numbers’ is an expression often used when venturing into the unknown and one that readily describes FSP, PenSam, PFA, PKA and SamPension’s approach to investing in the international property markets.

Each keen to increase their exposure to non-domestic indirect property holdings, the five funds came together at the end of last year to form the Danish Real Estate Club – a loosely fitting alliance that intends to invest between E1bn to E1.75bn in overseas property over the next three to five years.

While some Finnish investors eye the overseas property market, CapMan Real Estate and nine other institutional investors have signed an agreement to create a E500m private-equity real estate fund that will invest in commercial premises in Helsinki.

In spite of the Danish commercial property market’s recent subdued performance, stronger returns in 2004 from Norway and Sweden have buoyed the Nordic region’s overall performance, arresting a three-year downward trend. Chris Newlands rounds up the main trends for 2004

Hugo Greenhalgh opens our spotlight on LDI with an introduction to the issue of liability-driven investing, looking at the issues facing

pension institutions considering the portfolio implications of a closer focus on liabilities, at a time when mark-to-market reporting creates the need to increase the interest-rate sensitivity of portfolios

Sweden’s move to mark-to-market reporting and a traffic-light solvency system is a timely moment to assess the portfolio changes that are likely to take place among pension funds and life and pension companies.

Pension funds need to be aware of the wide discrepancies in the pricing of swaps-based solutions when hedging liabilities. The complex nature of the financial instruments can often be reflected in the opaque nature of the pricing structure.

ATP, Denmark’s supplementary labour market pension fund, implemented its first interest-rate swaps transaction, denominated in euros, in December 2001 – just two months after the financial services regulator announced a change to mark-to-market reporting. The fund has now implemented long-dated swaps to a notional value of E30bn. Liam Kennedy talks to Henrik Jensen, head of fixed income

A pension fund exists to provide sufficient returns to fund pension payments to its members. Measured against that criterion, it is largely irrelevant whether a fund outperforms or underperforms an industry benchmark; the acid test is whether the fund can discharge its liabilities. Peter Leane, head of Nordic sales at Merrill Lynch Investment Managers, examines the role that an LDI approach can play

After Alan Greenspan’s recent warning that hedge funds are exhausting the stock of quick and easy gains, Hugo Greenhalgh surveys the changing nature of the hedge fund industry – both in diminishing returns and the increasing interest among pension funds – and finds some funds sceptical about moving into the asset class

A recent report from the consultancy Watson Wyatt addresses in detail the question of overcapacity in the hedge fund industry. Chris Newlands shifts the focus to a marketplace that faces diminishing scope for investment opportunities with a herd of managers that is ripe for culling