SWEDEN - Swedes have rejected the euro with a substantial margin following the decision to continue with the referendum after the death of foreign minister and europhile, Anna Lindh.
Early reports suggest that 56.3% of the ballots cast were against replacing the Swedish krone with the euro, and 41.7% voting in favour. Some 2% were undecided.
Sweden was concerned that euro entry would undermine its strong welfare system. Some analysts fear that Sweden’s rejection will affect euro adoption elsewhere.
The news will mean that eurozone equity and bond managers will have to hold fire on the potentially lucrative region after it was suggested that Sweden’s National Pension Funds may have to revamp their investment strategies should the country introduce the euro.
Overseas equities, particularly eurozone stocks and bonds, were expected to be given a boost from any change, at the expense of Swedish equities, according to some commentators.
The SKr127bn AP1 holds the smallest percentage of Swedish equities in its portfolio compared to the other funds, at just 12%.
Nadine Viel Lamare, spokeswoman for AP1, said that the fund had carried out some modelling to account for the possibility of the euro.
But she added that it was difficult to determine any long-term effects because the fund’s investment boundaries are stipulated by law.
Currently, none of the AP-funds are permitted to invest in more than 2% above the market cap of any Swedish company and are only allowed up to 25% open currency exposure at any time.
Typically, these laws would have been subject to change if the switch to the euro went ahead.
Gothenburg- based AP2 - which holds about 20% in Swedish equities, the largest percentage of any fund - and the SKr130bn AP3 both said they would not be significantly affected by the move.
However, AP4, which has about 19% of its assets invested in Swedish equities, confirmed that it had conducted asset-liability studies to determine a proxy-portfolio under the single currency but declined to offer details.
However, in an earlier interview with AP4, Bjorn Linder, chief investment officer of the SKr113bn fund, said that it was examining a shift to core/satellite approach with possibilities including global small-caps investment grade bonds and alternatives, including hedge funds and private equity. These changes may still go ahead.
But one leading consultant in Sweden believes that the much-reported move away from Swedish equities had been overstated.
Jan Bernhard-Waage, managing director of Wassum Investment Consulting, said: “This change will happen eventually but it wouldn't be as clear as cut as a change on the bond side, which would be quite dramatically changed. Why would you stick to Swedish bonds after the euro?
“With equities, I think that quite a few organisations, including the AP-funds, believe they have superior qualities in managing Swedish equities. So there would be a longer time before the allocation to euroland equities went ahead anyway.“
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