Swedish pension company Alecta has announced changes to the risk level in the asset management of its two main products following the completion of the first phase of its strategic review of asset management.

Alecta decided to undertake the review following losses of SEK 19.6bn due to the collapse of three American banks the pension company had invested in.

The pension company has two pension products: A defined benefit (DB) product offered to customers within ITP 2, and a defined contribution (DC) product primarily offered to customers born after 1978 within ITP 1.

Alecta noted that the products have different lifespans and need for risk, and therefore concluded that the best balance between strengthening trust and the need to take risk is to have different investment models and a clearer difference in risk profile for the products’ asset management.

It plans to review these models annually to continuously ensure that they are adapted to the size of the portfolio.

For its DC product Alecta Optimal Pension, which corresponds to around 20 per cent of Alecta’s managed capital, it will continue with its current active asset management with concentrated holdings.

However, it will take place with “lessons learned from what happened in March 2023”, with the active management to have a downwardly adjusted risk with an increased number of companies and lower ownership shares in companies outside the Nordics.

For its DB product, Alecta intends to adapt the risk profile to a lower volatility for future payouts through increased diversification.

Looking ahead to the second phase of the strategic review in the autumn, the board has tasked Alecta’s management to analyse what such a portfolio should look like, which Alecta said would likely mean that active management is supplemented with index management.

The part of the capital that is still actively managed for the DB product will have a downwardly adjusted risk with an increased number of companies and lower ownership shares in companies outside the Nordics.

Mandates and limits for both products will be adjusted due to the changes in the investment model.

The board has also asked Alecta’s management to develop proposals for the design and implementation of the above, including the impact on the organisation and the need for enhanced competence.

"Confidence in Alecta has been negatively affected by the losses in the American banks in March,” Alecta board chair, Ingrid Bonde.

“With these proposals for changes, we learn from the spring's events, adapt the model to higher volumes and lay the foundation for continued high returns and adapted risk for our different categories of customers.

“Alecta is a major player in the pension system and in the capital market. Therefore, implementation of the decisions needs to take place in an orderly manner over a longer period of time, taking into account the preservation of values and ensuring a continued good return on the future pension capital.

“The exact details will therefore not be communicated in more detail.”

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