Danish fund provider Sparinvest recently picked up a mandate of over €500m from AP Pension, the Danish pension provider, which has been marked out as a particular example of management and services capabilities, according to comments provided to InvestmentEurope by CIO Thomas Gunnarsson,
The Sparinvest Group originally served only the Danish market, but in 2001 it set up a subsidiary in Luxembourg which, in addition to managing the Luxembourg-domiciled investment funds, provided a marketing platform for the EU. Today, the Group consists parent company Sparinvest Holdings SE, based in Luxembourg, and its wholly owned subsidiaries Sparinvest S.A. in Luxembourg - approved as a Ucits IV compliant management company by the CSSF - and the Danish branch ID-Sparinvest.
The deal with AP Pension is indicative of the ongoing growth that the group has experienced, as well as, in this case, reflecting the ability to respond to particular sustainability related investment needs, Gunnarsson suggests.
"It's a passive mandate with minor alpha generating enhancements, like intelligent rebalancing and active rounding based on our proprietary EM sovereign model," he says.
"Intelligent rebalancing is used to exit and enter new bonds prior to benchmark rebalance, hence not ending up in same trading sessions as the rest of the market. Active rounding allows us to over/underweight +/-20 bps on the country level taking political risk and momentum factor into consideration."
"Unlike publicly available ETFs, the mandate tracks an index with no liquidity constraints, hence will pick-up liquidity premiums from smaller issues. One of the biggest challenges of managing passive strategies within the credit space is trading costs. To accommodate this challenge, Sparinvest has a dedicated credit trader and has access to more than 30 brokers and all major online trading platforms."
"On top we apply an ethical overlay, whereby we screen for breaches of human rights, corruption levels and involvement in controversial weapons. We provide the client with ad hoc reporting on breaches and recommendations on appropriate actions. We also continuously keep the client updated on controversies that eventually could end up in breaches, giving them the ability to act prior to things escalating."
"Sparinvest has teamed up with several external data vendors with respect to political risk models and screenings."
Why did AP Pension choose Sparinvest?
"Sparinvest offers full flexibility in terms of strategy enhancements, reporting, screening, fund admin and custodians, hence were able to tailor the mandate to the specific needs of AP Pension."
"All investment activities are fully backed by integrated third party systems, enabling Sparinvest to efficiently operate its mandates and at competitive prices."
"It was the combination of flexibility in the above mentioned areas, price and our long track of responsible investing (RI) that eventually led to AP Pension's choice of Sparinvest."
Who manages the mandate?
"The mandate is managed by the Credit team in Sparinvest, which currently consists of 11 people."
"The strategy is based on two main pillars, trading and research. Trading is carried out by the dedicated credit trader and research input comes from our EM and RI teams."
Apart from further details of this particular deal, it would be good to have some insight into how this forms part of any possible strategy for evolving the services offered by Sparinvest.
"To offer top tier institutional class investment solutions for both the domestic and international markets is our clear ambition and being a responsible investor is part of our DNA and underpins everything we do at Sparinvest."
"We have teams operating high-quality, alpha-seeking investment processes and we also have the know-how and set-up to offer cost-effective and bespoke exposures that follow passive guidelines. So the AP Pension mandate is a good example of the services and value we wish to bring to clients and the service strategy we seek to pursue. And we are always looking to evolve with our clients. When you gain a deep understanding and insight into your client's particular challenges, that's when you find better solutions and form a long term and trusted partnership."
Within the Danish context, are you expecting consolidation pressures, or the market environment, or regulatory changes, to result in more mandates being shifted between provider firms?
"We like to think the main driver behind shifts between provider firms is asset owners' quest for better performance and service delivery. That said, as in most competitive markets, there are consolidation pressures but there are also strategic changes from time to time that lead to mandates being put on the market or shifted between provider firms."
Are you also looking at opportunity in the Pan-European Pension Product as it has developed via the European Commission, and which should come on stream through this year? If so, how does something like this mandate win sit alongside work ongoing to enter the Pepp market?
"We have the Pepp market and the opportunities it brings for us as an asset manager on our radar and follow it closely and where we are looking to provide cost effective and responsible investment products that are based on multi-asset class lifecycle strategies."
