The move by  legendary US corporate raider Carl Icahn to force the board of McDonalds to change its policy on cruelty in pig farming has highlighted a risk to investors that is not going away.

His nomination of two directors to the restaurant chain’s board, in protest at the continuing use of gestation crates to confine pregnant sows, is a chance for the fast-food chain to get ahead of a flow of regulation before it inflicts escalating costs and reputational damage.

Gestation crates are small metal cages which prevent pregnant pigs from moving or even turning around, and bans on pig producers using them have slowly emerged across the world. The first was imposed in Sweden in 1994 and many western countries including the UK, New Zealand and nine US states have since followed suit.

But the scale and depth of legislation against the crates shifted when voters in California, Massachusetts and the European Union backed bans to prevent the retail sale of imported pork reared using gestation crates from outside their jurisdictions, not just their own farms.

California consumes 14 per cent of US production, so the impact will be significant when the regulation, which was due to come into force in January, but is currently held up in the courts, takes effect.

Opposition, and costs, ramps up

The escalation marks a dramatic shift in the landscape. The European Union is planning to introduce restrictions on imports of meat from caged animals from 2027.

There’s dispute over how much costs will rise as companies make the necessary changes to their production, but those that are unprepared risk being hit harder – both materially and in terms of reputation – than those that get ahead of the new rules.

For example, gestation crates have a lifespan of approximately 25 years, and any installed today are unlikely to be in use for anything like that long, leaving farmers with pig housing they have paid for but can’t use because it breaches new regulations.

Opportunities for investors

Consumers are also increasingly aware of the caging of animals, and campaigners and activists will not stop publicising the practice – and exposing those who continue to use it – until there’s wholesale change.

Sales of brands that cite animal welfare in their labelling increased by 27 per cent between 2019 and 2021, showing the opportunities available for investors. Whole Foods, which is already compliant, expects not to have to increase prices after the California crate ban comes into force, while shoppers in other stores face paying up to 7.7 per cent more for uncooked cuts of pork.

Investors and companies tempted to dig in to fight the new rules need only to look at how quickly egg production has evolved to see how fast the consumer tide can turn, and how quickly they could be left with dramatically devalued assets – facing high costs just to catch up.

More to come

Cage-free eggs represented just 2 per cent of the US market in 2010, but this increased to 28 per cent by 2020 and is expected to hit 70 per cent by 2026. The rapid growth has prompted Cal-Maine Foods, the country’s largest producer, to invest over $500 million since 2008 to expand the company’s cage-free egg production capacity.

In 2011, UK farmers lost £400 million in stranded assets in the form of recently purchased cages. UK farmers complained to government that they had budgeted for the cages to last for as long as 50 years, but those plans had to be scrapped long before then.

Many investors, including those in FAIRR’s $48 trillion network, will welcome Carl Icahn’s attempt to force McDonalds to live up to its promises on welfare grounds, but it’s evident that slow movement on gestation crates is as much an investment risk as it is an issue of animal welfare.

The financial, reputational and regulatory threats from continuing to cage pregnant pigs need to be addressed by the development of facilities that future proof farms by meeting and exceeding the coming requirements.

If the industry fails to prepare, it will risk falling behind regulation, ever-increasing costs and continued exposure to shareholder action – until it is forced to fall into line.

For investors managing ESG risks, the case for swift action is clear.

 

Jeremy Coller is founder and chair of the FAIRR Initiative, an ESG focused investor network, and Chief Investment Officer of Coller Capital. 

 

“When leverage works, it magnifies your gains. Your spouse thinks you’re clever, and your neighbours get envious,” wrote Warren Buffett in his 2010 shareholder letter in one of his frequent criticisms of the strategy where investors borrow to invest more. “But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices.”

Buffet’s comments contrast with other investors who are equally convinced leverage provides a vital ingredient to their portfolios, either reducing risk by borrowing to invest more in low-risk assets and boost diversification, protecting their funding levels, or for a bolder cohort, allowing them to increase investments in risk assets.

Through the noise of protagonist assurances and critic warnings, one thing rings true. Against the backdrop of rising rates, market turmoil and pension funds’ ever-growing illiquid allocations, leverage is going to increasingly come under the spotlight.

Different strategies

Last year board members at CalPERS, America’s biggest pension fund, voted in favour of borrowing to invest an amount equivalent to 5 per cent of the fund’s value, around $25 billion, to help it meet its 6.8 per cent return target.

In the Netherlands, pension funds don’t lever their overall balance sheet but new laws being drawn up to support the country’s moves to a DC-based system are exploring how leverage could be applied between different lifecycle funds.

Canadian funds have been applying leverage for over a decade. The C$541.5 billion Canada Pension Plan Investments applies 22 per cent leverage to the portfolio, borrowing money to increase exposure to less risky assets and boost diversification without further increasing its already above average 85 per cent equity risk target. CPPI’s use of leverage leaves its risk tolerance unchanged, says Edwin Cass, chief investment officer at CPPI.

America’s State of Wisconsin Investment Board (SWIB) which manages $144 billion of state retirement and investment funds and has used leverage since 2010, approved an increase in the Core Fund leverage from 10 per cent to 15 per cent in its 2021 asset allocation in a strategy that involves reducing equity exposure by leveraging low-volatility assets like fixed income.

“The leverage helps reduce risk by supporting a higher allocation to lower risk fixed income securities and a lower allocation to equities at the same overall target return. This strategy is one part of our overall long-term strategy of greater diversification and risk control,” says Edwin Denson, executive director and CIO at SWIB. Elsewhere US funds like Texas Teachers introduced leverage in 2019.

In another approach, Sweden’s SEK849 billion ($90 billion) AP7 has a riskier strategy, borrowing up to 15 per cent of its portfolio value to allocate more to global equity.

“We can take on a bit of risk, and to get that additional risk we use leverage on our global equity exposure,” says chief investment officer Ingrid Albinsson. Sister fund AP1 has also been using leverage for a long time, motivated by diversification.

Other pension funds have a different approach. “Leverage can help increase fixed income exposure and reduce the total risk to a fund’s surplus,” explains Roman Kosarenko, senior director, pensions, at $2 billion listed Canadian corporate Loblaw Companies Limited who studies leverage use in pension funds. He says that once leverage is viewed through the lens of protecting the surplus – rather than focusing on asset returns – it is much better understood by pension funds.

“Every dollar of incremental returns you earn via leverage provides you with a surplus cushion to protect against a possible hit to your surplus, including from rising interest rates.”

Sources of finance

Over the years, Canadian funds’ expansion and sophistication in tapping leverage reflects how central the strategy has become with almost all Canada’s big funds running sizeable commercial paper programs and borrowing billions via the repo markets. CPPI issues commercial paper in the domestic, US and UK markets for terms out to 30 years. Elsewhere, it borrows in the repo market while around one third of its leverage comes through short selling derivative contracts.

The $227.7 billion Ontario Teachers’ Pension Plan has developed a sophisticated investment funding strategy designed to diversify the maturity, market-sources and cost of its borrowing run out of the Ontario Teachers’ Finance Trust (OTFT), set up in 2015 to sell debt to international institutional investors. Canadian funds have also jumped on green issuance as another source of finance, issuing around $6 billion of green debt to date.

Interest rates

Leverage strategies have been fuelled by low interest rates and rock bottom borrowing costs. Canadian pension funds with a AAA rating can borrow for peanuts, says Alex Beath, senior research analyst at CEM Benchmarking in Toronto who argues for them not to do so, is actually imprudent.

“In a low interest rate environment, not to consider how a fund might be able to use leverage is imprudent. It is so cheap to borrow, funds almost have to look at leverage as being part of a good fiduciary.”

Unlike Beath’s cheerleading however Malcolm Hamilton, senior fellow at the C.D. Howe Institute in Toronto, is a fierce critic of leverage. Still, he charts its origins from the same source. As interest rates dropped, real returns from bonds fell away. Pension funds found that increasing risk by leverage was a convenient way to meet their return objectives.

“What they’ve done is just as risky as reducing the bond allocation and increasing the allocation to public equity. Had interest rates not dropped, I suspect Canadian pension funds would have little leverage today.”

It means today’s changing macro picture of increasing interest rates and rising borrowing costs will put pressure on pension funds to ensure financing costs are adequately compensated with expected returns.

Investors using leverage and borrowing to invest by expanding their fixed income exposure in a rising rates environment, could end up buying into an overpriced asset that will steadily depreciate as rates rise. Today’s climate opens the door to operational unpredictability, making a fund’s liquidity profile and confidence in its decision makers crucial, says Kosarenko.

“Unexpected increases in interest rates devalue the bond holdings and substantially reduce the actual (as opposed to expected) rate of return on assets.”

It leads him to reflect that now might not be the time to embark on the strategy – and pension funds that have never used leverage may have missed the boat.

Pension funds that haven’t used fixed income leverage, missed years of opportunity to improve their surplus in an environment of secularly falling interest rates, he says.

“If CalPERS is just about to start using leverage, they’ve missed a lot. With interest rates about to go up, it’s probably not the best time to start using it,” says Kosarenko.

Pension funds that have never used leverage may have missed the boat.

Looking ahead he is also concerned with the proliferation of leverage strategies now offered to smaller pension funds via institutional pooled vehicles. These strategies are subject to more pronounced settlement impact, he warns. Leverage is best managed via separately managed, segregated, accounts which give essential operational flexibility which pooled funds, governed by fixed policies around rebalancing, lack.

“If there is a sharp rise in interest rates, pooled funds may still be forced to de-lever at a time bonds are temporarily cheap, selling out at prices they really don’t want to sell out at.”

Liquidity

Leverage depends on ample liquidity. Pension funds that use leverage need to have enough on hand to ensure interest rate payments on their borrowing on top of all the regular calls on their liquidity like paying benefits and cash on hand to meet capital calls. Getting a grip on liquidity was a fundamental pillar of CalPERS former CIO Ben Meng’s ambition to introduce leverage at the fund. Meng’s first step was developing a liquidity framework that identified the pension funds calls on liquidity as well as liquidity sources like dividends, turning assets to liquidity and borrowing capacity via repo markets.

At CPPI strategy is shaped around floors to its liquidity coverage ratios, below which the organisation is put at risk. Cass adds his priority is to target a level of liquidity that does more than simply allow the fund to meet its liabilities.  He wants money on hand through cycles to re-up with private equity funds while the variation margin in derivative contracts requires capital on hand.

But things can go wrong for investors re-financing repo arrangements on a regular basis, warns Serguei Zernov, formerly of OMERS Capital who is now an independent investment manager and researcher based in Toronto.

Acute illiquidity in the short-term lending market on the eve of the pandemic in March 2020 caused the repo market to become suddenly illiquid, making it costly, or impossible, to roll positions. Now investors are watching how current stresses in global markets linked to the economic fallout of Russia’s invasion of Ukraine impact.

“Without other recourses to liquidity, pension funds could be forced to liquidate investments and close positions at the worst time,” says Zernov.

For Hamilton, a key concern is Canadian pension funds ever-growing illiquid allocations, difficult to sell in a hurry. A prolonged downturn like the 1970s could have a significant impact on levered pension funds with a focus on illiquid investments, he warns. CalPERS’ board is as familiar with the investment team’s argument for a larger private equity allocation as they are its support of leverage. Building out the current 8 per cent allocation to around 13 per cent is a critical part of the return seeking allocation and central to the new strategic allocation.

the importance of Governance

Leverage fills many investors with trepidation but it’s worth remembering it will already exist in many of their investments. For example, private equity allocations to LBO funds will be highly levered, says Beath.

Elsewhere he notes how pension funds got burnt in the GFC with highly leveraged real estate exposure.

“A year before the GFC, if you’d asked them how much leverage exposure they had, they would have said none,” he says.

“Hidden” leverage on top of new strategies makes the need for governance even more important. Zernov stresses the importance of centralising the strategy beyond just an asset class level, aggregating and reporting all leverage instruments at the total fund level.

“There needs to be a clear understanding by custodians and board members what kind of leverage is used, and if risk is consistent with objectives and risk profile of the plan.”

At CPPI layers of robust governance include a special committee that came into play to control capital going out the door and ensure liquidity levels through the 2020 crisis. It was stood down nine months later.

Still, Hamilton argues that even Canada’s professional boards with their finance backgrounds and familiarity with the strategy, have governance gaps. Many public Canadian pension plans offer members guaranteed benefits with no link to fund performance, he explains.

“Members may bear part, or none, of the risk while the public bears all, or most, of the risk depending on the plan.”

He says that because members don’t bear the risk, the funds feel they can take more risk, free from ultimate responsibility.

“From my perspective, we have a governance failure – the public bears most of the risk while the plan members receive the expected reward for risk taking. No one represents the public interest in the decision-making process.”

No strategy, leverage included,  works under all conditions,  concludes Kosarenko.

“Pension funds using leverage should monitor market conditions and have policies on scaling down the leverage if there is a rising likelihood of deteriorating conditions.”

 

 

Virtually any investment professional will acknowledge the value of diversity when it comes to investment strategy and decisions, particularly during the current uncertainty. Diversify, spread your risks and look for opportunities across sectors and asset classes.

Yet, the opposite practice is often true in the workplace. Women as a percentage of CFA Institute United States members have barely moved from 17 per cent since 2017 yet have reached a still low 30 per cent for corporates generally. And Morningstar found that the gender diversity of fund managers globally has remained largely unchanged over 20 years. It noted that women fund managers are twice as prevalent in Asian markets.

The investment profession also trails on race and ethnic diversity. In 2020, 2 per cent of CFA Institute members in the US identified as Black, far below the US population of Black graduate degree holders. Only 3 per cent identified as Hispanic and 1 per cent as Latino. Although numbers are higher for Asian investment professionals, they are often not reaching the highest leadership levels.

Yet Willis Towers Watson, the global investment consultancy, found in 2020 that diverse investment teams outperformed those with no women or ethnic minority employees by an average of 20 basis points a year. Clients are also demanding movement on DEI. In short, the industry’s glacial pace of change has to accelerate.

Why we need a framework for change

In an industry that moves quickly and can be both opportunistic and strategic, the investment sector needs to operationalise a structured DEI approach.

This is why the CFA Institute DEI steering committee asked the DEI Code working group of CFA Institute committee members, investment professionals and DEI practitioners to create a voluntary DEI Code in March 2020, beginning in the US and Canada. The code was launched in February 2022 following a two-year plus industry-wide consultation and drafting process.

The working group made the code practical for all organisations in the industry. Although voluntary, the code requires strong commitment and accountability from senior leaders at investment companies and engagement from employees. DEI needs to be embedded within strategic business imperatives to create an impact.

This was highlighted in a CFA Institute report in August 2021, Accelerating Change: Diversity, Equity, and Inclusion in Investment Management, which outlined practical and actionable takeaways from DEI efforts. The report also forms the research underpinning the DEI Code’s implementation guidance.

Understanding the code

The DEI Code comprises six core principles. The signatories commit to:

  • Pipeline: Expanding the pipeline of diverse talent.
  • Talent acquisition: Designing and implementing inclusive and equitable hiring and on-boarding practices.
  • Promotion and retention: Designing and implementing inclusive and equitable promotion and retention practices to reduce barriers to progress.
  • Leadership: Using their position and voice to promote and improve DEI in the investment industry and to being held accountable for their firm’s progress.
  • Influence: Using their role, position and voice to promote and increase measurable DEI results in the investment industry.
  • Measurement: Measuring and reporting on their progress in improving DEI within their firm and providing regular reports on the metrics to their senior management, board and CFA Institute.

When adopting the code, signatories will need to report on the relevant metrics for their organisations annually using a confidential reporting framework. This is important as the code looks to meet the organisation where it is, define its current state, and drive improvement from a realistic foundation.

CFA Institute will then report its overall findings on industry progress every year. It will also hold various roundtables with the signatories to understand their implementation strategy, share tested practices, and showcase successes.

Sustaining improvements

The DEI Code is designed on a common belief: that improvements can offer better investment outcomes and help create better working environments. The latter is especially important as attracting and retaining talent continues to be a significant challenge in the investment industry. We also wanted to make it adaptable as practices evolve, keeping aspirations high and grounded in business needs.

When it comes to DEI, we know that regionally specific nuances are critical to capture within any code to make an impact. In this regard, we see the current DEI Code for the US and Canada as a starting point. We will be adapting the code for each region, working with local stakeholders to reflect key priorities.

At CFA Institute, we continue to advocate for professional excellence and adherence to ethical standards. Our existing codes and standards are how we hold ourselves accountable, and now they include DEI.

Sarah Maynard is global head, external diversity, equity & inclusion, at CFA Institute

 

The long awaited merger between the two Australian super funds, QSuper and Sunsuper, which has been two years in the making, came into force on Monday, February 28, creating Australia’s second largest super fund after the A$260 billion AustralianSuper.

The newly formed A$220 billion Australian Retirement Trust (ART) is aiming to more than double its size to become a A$500 billion fund by the end of the decade, according to chief executive Bernard Reilly.

Reilly who steps into the role having been chief executive of Sunsuper since October 2019 after an extensive career in the international banking and finance sector in Australia and overseas, calls it a merger of equal players which is unusual in the current superannuation industry.

“We see ourselves as a A$500 billion fund by the end of the decade with about 2.8 million members,” Reilly said.

QSuper had assets of more than A$130 billion with 500,000 members while Sunsuper was slightly smaller in size with assets of A$97 billion but had a much larger membership base of 1.4 million.

Reilly says ART’s growth plans include potentially more mergers, continued expansion of its management of corporate super accounts and continuing to partner with outside financial advisers. It has many merger deals, including with Australia Post super fund and other corporates, in the pipeline.

New institutional giant

The new ART will become one of the institutional giants of Australia, with a current annual inflow of funds of just under $14 billion a year.

Reilly, whose career includes 25 years working for State Street Global Advisors in Australia and its headquarters in Boston where he was global head of strategy, said the combined fund was expecting to play a bigger role in investment deals given its financial firepower.

QSuper has been involved in the A$24 billion industry super fund-backed bid for Sydney Airport while Sunsuper was a part of a consortium including the Future Fund and the Commonwealth Superannuation Corporation, which last year bought a 49 per cent stake in Telstra InfraCo Towers, a business with some 8,200 towers around the country, for A$2.8 billion.

“We have already been playing in that space (deals for major infrastructure assets),” he said. “But now we can look at taking a bigger stake in some of these opportunities going forward as a partner.”

The fund’s investments will be headed by Sunsuper’s chief investment officer Ian Patrick, a former chief executive of JANA Investment Advisers, who has been with Sunsuper as CIO for the past six years.

Reilly said being able to take a larger and more active role in big ticket investments could result in better returns for the fund’s members.

“When we think about the investment outcomes, (it can help) to be able to have a seat at the table in some of those deals,” he said.

“Ultimately, it involves better investment outcomes for members.”

The question of internalisation

But Reilly said ART had no plans to undertake a major internalisation of its investment management which has been the case with many other larger super funds over the past decade.

He said he expected that the fund would continue to use external fund managers for “a long period of time”.

“This (the merger) gives us the increased scale to really drive down the cost of using managers,” he said, adding he thought the jury was still out on the merits of internalising fund management.

“There needs to be a longer time frame than 10 years to see whether internationalisation works.”

Longer-term thinking

Reilly said the fund’s younger membership cohort, with 70 per cent of its members under the age of 50, also gave it the capacity to make long-term investment decisions.

“It means that we have long periods to retirement, the money is locked up for long periods of time, which allows you to be able to invest for the long term,” he said.

He added the combination of a younger demographic of members with the annual cash inflow of A$14 billion would allow it to make long term investments in infrastructure and other privately owned assets and that the merger would also allow the fund to take advantage of economies of scale.

Sunsuper told its members in January that they would see the account administration fees on their accumulation accounts reduced from $1.50 a week to $1.20 a week once the merger took place.

Reilly said the new Australian Retirement Trust intended to take its role as a “new pillar of capital in the Australian market very seriously”.

“Whether that’s engaging with companies, whether it is in the provision of capital when listed companies are raising money or whether it is in the unlisted space,” he said.

“We take that responsibility very seriously.”

New name “logical and literal”

Reilly defended the prosaic nature of the combined fund’s new name, Australian Retirement Trust, which also has similarities with AustralianSuper. He said the board wanted to adopt a new name which was logical and literal.

He said the three words “Australian”, “Retirement” and “Trust” were all important statements about the combined organisation.

He said the fund was about retirement. “The word ‘trust’ was also a really important word for us to use,” he said.

“Coming out of the Royal Commission (into misconduct in the banking and finance sector), trust is a really important attribute. We want to put it upfront in our name.”

The combined fund now has 162,000 employer clients, with plans to take over the management of the Australia Post super fund this year, and has tenders outstanding for management of corporate funds worth a total of some $5 billion.

Reilly said there were “a couple of discussions” underway about possible mergers but the primary focus on both funds had been the successful completion of the merger.

 

Value add investing has evolved through many different business cycles over the last two decades. While buying low, ‘fixing’, and selling high has remained the broad strategy, each period of market dislocation has brought new layers of complexity – and with it, reward, for those with the tools to unlock real estate value. In today’s market, the spectrum of potential opportunities is widening, with new sectors moving into the scope of institutions. But not everything is cheap. What could this mean for higher-return-seeking investors in the post-pandemic era?

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Back in 2001, Sweden’s four buffer funds had combined assets under management of SEK 546 billion ($57 billion). Today, the combined assets of AP1, AP2, AP3 and AP4 have grown to SEK1,937 billion ($203 billion) in a year that also saw the four funds active, low-cost approach focused on ESG integration reap the best returns in their history. The average return of the four funds came in at 19.3 per cent after expenses, (compared to an average of 10.5 and 10.7 per cent on a five and 10-year basis respectively) well above the income index returns.

Active strategy

At AP1, where returns just topped the pack at 20.8 per cent, strategy focuses on robust, active decision-making and a bold risk mandate. All Swedish equities and most of the fund’s exposure to Europe and the US is managed internally although emerging market equities are managed in collaboration with selected external managers.

“Our strategy was to allocate capital actively and act quickly to achieve desired exposures for the fund as market sentiment changed,” said chief executive Kristin Magnusson Bernard. “Formulating strong views, daring to act on them and constantly challenging them have been critical success factors for us during the last year, and will remain so going forward.”

At AP4, which returned 19.2 per cent, active management was also a key tenet of success. It contributed 3.5 percentage points to the return corresponding to SEK15.2 billion ($1.6 billion) in 2021. The fund also has around 17 per cent of its portfolio in alternatives where integrating sustainability is a key theme.

AP3 also bagged its best ever annual results of 20.7 per cent, delivering an average annual return of 11.1 per cent over the last 10 years bolstered by the fund’s large exposure to listed Swedish equities with renowned sustainability credentials.

At SEK 441 billion ($46.3 billion) AP2, returns of 16.3 per cent were led in the main by private equity which returned 66.1 per cent, said chief executive Eva Halvarsson.

Low Costs

Low costs linked to sophisticated internal management define strategy across all four funds.

At AP1 the total expense ratio came in at 0.07 per cent. At AP2 the fund reduced the asset management costs to historically low levels of 0.11 per cent while at AP3 the asset management cost ratio was 0.08 per cent. At AP4 2021 costs were also 0.08 per cent of assets under management.

This amounts to “less than half that for corresponding pension funds internationally,” according to Niklas Ekvall chief executive at AP4.

ESG

ESG integration is a key tenet across all the funds. At AP2, global equity and credit portfolios have been managed in accordance with the EU Paris-Aligned Benchmark (PAB) since 2020. It means the fund no longer invests in around 250 companies because they receive revenue from coal, oil or gas. The total carbon emissions of AP2’s equity portfolio continues to drop, declining 20 per cent in 2021 compared with the previous year mainly due to changes in holdings but also companies cutting their emissions.

Elsewhere, AP4 has cut the carbon footprint of its investments in listed equities by 60 per cent since 2010. AP4 has also set a target to have net-zero emissions by 2040 and is increasing its allocation to investments that contribute to the sustainability transition.  During 2021, AP4 made such new thematic sustainability investments of SEK 13.7 ($1.4 billion).

ESG integration is shaped by the Council on Ethics which continued advocacy at around 90 companies, focusing dialogue around  human rights, corporate governance and climate. As sustainability is increasingly being integrated into the funds’ management strategies and objectives the Council on Ethics plans to review its mission and strategy ahead.

Looking ahead

All buffer fund CEOs warned of a more difficult investment climate ahead.

“If 2021 was the year of recovery, we are now heading towards reductions in monetary and fiscal stimuluses around the world,” said AP1’s Magnusson Bernard. “The economic cycle is maturing quickly, and central banks have started to unwind their asset purchases in various ways ahead of future interest rate increases. When, and if so by how much, inflation falls back will affect both how decision-makers react and risk appetite in financial markets. Geopolitical tensions and energy dependencies are likely to continue influencing markets.”

AP4’s Ekvall warned of widely varying economic outcomes ahead.

“The tug-of-war between various scenarios will likely at times lead to nervosity and market turbulence. In general, in the coming years we cannot expect to see the same, favourable investment environment and very favourable returns on financial assets that we have experienced during the past 10 years.”