By Hamlin Lovell, NordicInvestor
Nordea has this year hired Kerstin Lysholm as CIO for the Investment Centre within Nordea Wealth Management. Kerstin reports to Vesa Ollikainen, who is the head of the Investment Centre, and based in Helsinki. “Kerstin was hired as part of the new leadership to drive the business forward strategically. She will set the direction and guide the ambitions within Wealth Management, while at the same time focus on developing and refining the current offerings to clients, specifically within the sustainability and alternatives sectors to expand the client offerings in these areas. Kerstin has plans to expand the team and really cement the strength of the Investments team within the wider Nordea Wealth organisation. As part of this growth Kerstin has hired Linsay McPhater as Senior Portfolio Manager for Alternatives. ‘When Kerstin was hired at Nordea she approached me with an exciting opportunity to be responsible for the alternatives portfolio within Wealth Management.’
“There is a solid team already in place across the regions, but there are plans to redefine roles to be more focussed and to complement the existing team with new hires. This is a key priority to ensure the correct team is in place in order to drive the business forward. The ambition is to have the right team in place by the start of 2020”, she adds.
Broadening access to alternatives
“We plan to allocate to a broad range of alternatives, depending on where we see the most compelling opportunities in the current market. This could include real estate, infrastructure, private credit, and hedge funds, as well as private equity”, says McPhater, who specialized in private equity for five years at Danica Pension. She previously worked in alternative investments in London at Morningstar and Aberdeen Standard Asset Management.
“Currently within Nordea Wealth, we service clients across all channels, including private, personal, and business banking. Managing money for these types of clients differs from doing so for a pension fund. There are limitations to liquidity for the majority of clients whereas pension funds do not need as much liquidity. Within the alternatives space we currently only allocate to listed alternatives, given the liquidity constraints clients have; all clients can access these managers. Currently there is limited scope for clients to gain access to unlisted alternatives in a relatively liquid way, so we are reviewing investment vehicles for these types of products. There is a strong focus from the leadership to find solutions for clients to invest in these types of vehicles, which offer more liquidity and lower minimum ticket sizes, usually around EUR 100,000. This is a key focus area for 2020”.
As far as ESG is concerned, Nordea is a clear leader in this area, and has been pursuing ESG for over ten years. “Sustainability is a key focus area and currently there is a sustainable portfolio of funds available for clients”, she says. Nordea is a recognised leader in the space, runs EUR 5.9 billion in in house sustainability funds, and allocates to ESG strategies internally and externally (in this area, Nordic Investor has also previously interviewed Nordea’s Gilles Lafleuriel, who is based in Stockholm, here https://nordic-am.com/people/engineering-a-roster-of-esg-focused-managers-and-products/).
ESG is evolving fast. Having started with negative screening and exclusion of industries such as cluster munitions and more recently coal, the approach is now moving towards an emphasis on driving forward positive change.
“There could be scope to pursue Impact Investing in alternative strategies, however this is still to be defined”, says McPhater. Indeed, Nordea Asset Management has already partnered with Jan Stahlberg, who founded Europe’s largest private equity group, EQT, to develop a private equity impact investing strategy called Trill Impact Fund. This is geared towards the UN Sustainable Development Goals (SDGs).
Advisory model portfolios with open architecture
Nordea Wealth Management designs model portfolios and offer advisory solutions to clients. It is the largest provider in the Nordic region of services within private banking, life and pensions and wealth management. The client base is made up of c 2m customers in Denmark, c 3m in Finland, c 1m in Norway and c 4m in Sweden. Fund structures are tailored to local legal structures and tax reporting. (The alternatives product will not be distributed through Nordea Life and Pensions Sweden, Norway and Finland; Nordea Life and Pensions Denmark was in 2018 sold to Norliv, which is now called Velliv).
Nordea Wealth can use funds from other parts of Nordea, such as Nordea Asset Management, and external funds. “Within wealth management model portfolios are split between internal and external managers in the model portfolios. There are preferred partners which we use, however there is no stipulation to go outside if we see more compelling opportunities internally”, explains McPhater.
Nordea Wealth can allocate globally but current manager selection is predominantly from Europe: “We do not source on a country basis, but on where we view the best managers within the strategy. However there is limited sourcing from Asia, the majority is within Europe”, she says.
Synergies within Nordea
The new team could not only allocate to Nordea funds. It could well be pooling resources with other parts of Nordea in other ways: “we hope to collaborate and strengthen relationships internally where there are currently offerings and where other departments do similar things. For example, there is an internal private equity fund of funds and the Treasury department investing on behalf of the balance sheet, so if we collaborate in the future we can utilise what we have internally and then strengthen relationships with external funds and get better terms when we invest”, she says
The broader Nordea organization has a huge presence in the region and beyond. Nordea Asset Management claims to be the largest financial services group in Northern Europe, servicing approximately 11 million customers. Nordea claims to be “the largest Nordic retail fund provider, with a 16% market share” and it “services over 475 Nordic and international institutional customers”.
Globally, the firm runs over EUR 200 billion. It also has offices in most of the major continental European countries, the US and Asia.
The investment philosophy is active management, across all asset classes.
It also distributes third party funds, working with 300 international fund distributors, including 25 global wealth managers. For example, in the alternatives space, the CapMan Nordic Property Income Fund (“CMNPI”), a non-UCITS fund managed by CapMan of Finland, is distributed by Nordea in the Nordic region.