Sweden’s biggest pension fund manager Alecta has ousted its CEO Magnus Billing following massive losses in high-risk US bank investments.
The SEK1.2 trillion (US$117 billion) fund invested around US$2 billion in Silicon Valley Bank (SVB), the Signature Bank and First Republic Bank (FRP). Before he was fired to restore confidence in the fund, Billing admitted that the losses sustained from these banks represents “a big failure” in strategy. Alecta launched an investigation into whether the “current investment strategy, risk allocation and mandate for asset management are optimal.” It has already dismissed its head of equities Liselott Ledin and replaced her with Ann Grevelius, who has served as head of SEB's asset management. An investigation into the investments is due to conclude in mid-2023.
Alecta is likely to shift from a highly concentrated portfolio, comprising of around 100 stocks totalling SEK480 billion (US$46 billion), to reduce negative risk exposure. Billing had decided to change Alecta’s asset management strategy with “a reduction of the risk with large stakes within companies far from our home market,” primarily in US holdings.
The organization that oversees the choice of providers of the country’s supplementary pension for the industrial and commercial sectors, ITP, is also likely to come under scrutiny. Last month, it awarded Alecta a new five-year mandate as the default provider of ITP pension insurance, suggesting it did not view the fund’s lack of due diligence as a significant concern in the tender – although it has suggested it could review the decision in the event of intervention by the Finansinspektionen (Financial Supervisory Authority).
Analysis by Global SWF found that Alecta has taken the biggest hit in terms of losses from the three niche US banks. Around US$3.57 billion in asset value was lost by 16 top sovereign wealth and public pension funds as the banks shut shop. In addition, US$1.56 billion was lost by state-owned investors in the Credit Suisse debacle.
However, in the scheme of things, the losses are not a massive hit to the SOI universe. We estimate that SWFs have an exposure of US$ 1.0 trillion and PPFs an exposure of US$ 1.6 trillion to financial stocks – together, State-Owned Investors hold US$ 2.6 trillion in stocks of financial institutions globally, of which US$ 1 trillion are of US-based banks and managers.