Alecta, Sweden’s biggest pension fund with $110 billion of assets under management, has fired its chief executive Magnus Billing following nearly $2 billion of losses incurred from last month’s US banking crisis. The pension fund is also beginning an enquiry into how it manages equity, due to report in the summer.
Alecta, known for maintaining a very concentrated equity portfolio, has also begun reducing risk from its large stakes in companies far from its home market, focused particularly on holdings in the US.
In a statement, Alecta said a strategic review will explore how it will conduct equity management going forward, headed up by Ann Grevelius, now acting head of equity.
Alecta began investing in SVB in June 2019 and made its last investment in November 2022. The pension fund is the fourth largest shareholder in SVB. It also had investments in Signature and First Republic Bank.
Grevelius is a member of Alecta’s board, a position she will resign during her time as head of equity. She was previously head of SEB Investment Management and will take over from Liselott Ledin who has left her post as head of equity following 28 years at the pension fund. The statement said the review is expected to be ready for board analysis in good time before the summer.
Deputy CEO Katarina Thorslund has been appointed acting CEO, and the recruitment process to find a new CEO will begin immediately. In the meantime, Ingrid Bonde will support the organization as chair of the board.
Alecta head of asset management, Henrik Gade Jepsen, is currently on long-term sick leave due to complications following a Covid infection. He is expected to have recovered and be back in the role after the summer. Until he returns, Kerim Kaskal has been appointed as acting head of asset management. Kerim Kaskal has extensive experience in asset management, including as head of asset management at AP3.
The statement said that following large losses in three American niche banks last month – SVB, Signature Bank and First Republic Bank – management and the board have worked intensively to isolate the losses and work through the processes within asset management to understand how the situation arose.
Alecta’s management has made the assessment that the investment decisions were within the framework and mandate established by the board. The board shares that assessment and welcomes the Financial Supervisory Authority’s review of the course of events, said the statement.
SVB was the largest bank since the 2008 financial crisis to collapse when California regulators closed it, sparking market disruption and heightened stress across the banking sector. It led to Credit Suisse, already in trouble with losses, being forced to merge with UBS by Swiss regulators to prevent wider contagion.
The announcement of Billing’s departure follows attempts to reassure in the fund’s latest annual report, published last week. Billing wrote how the spike in interest rates had caught the investor unaware.
“Since 2016, we have invested in three banks in the US with completely different business models and with operations in different parts of the country. These investments developed well during the first years, but in 2022 the situation worsened as interest rates rose. Although we saw that there were challenges ahead, our assessment was that they could be resolved. We, like most analysis houses and credit rating agencies, misjudged the rapid negative developments for US banks that occurred in March 2023,” he wrote, adding.
“The impact on pensions is small, partly because the loss corresponds to less than 2 percent of our managed capital.”