Sweden’s Biggest Pension Firm Cuts Stocks on Inflation Concern
The specter of accelerating inflation is prompting the biggest pension manager in Sweden to cut its holdings of stocks and bonds.
Alecta, which manages $130 billion, is instead boosting exposure to alternative assets such as infrastructure projects and residential housing in an effort to preserve returns.
“Longer term we may see rising inflation and that is one of the reasons we are switching the portfolio towards more real assets,” the firm’s chief investment officer Hans Sterte said in an interview.
In Alecta’s home market of Sweden, calls of excessive valuations are getting louder with the benchmark stock index up about 30% so far this year. Listed markets are “priced for perfection” and “everything is very expensive,” Sterte said.
To guard against such risks, the Swedish pension giant is planning to increase the share of alternative assets to 20% of the total portfolio by 2024 from the current level of 12%. “We have increased real assets about 5% over the past three or four years and we intend to continue increasing,” Sterte said.
The strategy has seen Alecta take a 49% stake in Telia Co AB’s tower business in Norway and Finland, alongside co-investor Brookfield Asset Management. The manager has also made investments in Stockholm Exergi AB, as well as bets on unlisted companies such as Epidemic Sound AB and Stena Renewable AB.
“The private side is taking market share from the listed side,” Sterte said, adding that it’s easier for businesses “to expand and change in the private world than in the listed world.”
The property market is another key area of focus for Alecta. Its largest alternative investment so far is Heimstaden Bostad AB, a pan-European residential housing company that was created in partnership with Heimstaden back in 2013.
“We want to increase the share of real assets with long, stable cash flows,” Sterte said of the rationale behind the real-estate venture.
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