The normally sleepy world of pensions is being woken from its slumber and has been forced to review its staff numbers – a very rare occurrence indeed.
The industry continues to face multi-facetted challenges and generating returns after 2008 will probably be on top of all institutional investors’ agenda for 2009.
The safe harbour provided by fixed income proved not so safe at all; equity portfolios have been pummelled; the promise of active management has broadly disappointed and the once astronomical returns of alternative strategies have come back to earth along with other asset classes.
But as asset allocation targets are adjusted to meet funding levels so too are staff numbers. It’s unusual see any dramatic changes in staffing levels of pension funds as most have small teams and many outsource most investment related roles.
The national buffer funds in Sweden, however, have had fairly large in-house teams as their philosophy has been to manage some assets in-house and also use the external managers as something of sounding boards and teachers.
The four buffer funds lost around 20% of their assets in 2008, mainly a result of their high equity allocation. AP1 cut 20 people redundant in response to the changing investment climate.
Johan Magnusson, managing director of AP1, believes that the fund needs to “take a more flexible approach and be more opportunistic with our time horizon”.
A local investment consultant said that this may lead to the other buffer funds going through similar changes as the four funds tend to converge in their strategies over time.
Much like many institutional investors, the investment consultant suggests Nordic pension funds could look to bolster their risk management teams.