SWEDEN - Exclusive: Första AP-fonden, the First Swedish National Pension Fund, is to put out two specialist mandates and a search for a global custodian over the next few months.
Staffan Ifvarsson, project coordinator for AP1, said that the fund is gearing up to issue an active US small cap equities mandate by the end of June and a European small caps brief by September. Details, such as mandate sizes and benchmarks, are still being discussed, added Ifvarsson, although it is likely that the US brief will be set against the Russell 2000 (ex-REITs).
The moves are advised by Mercer Investment Consulting.
The portfolios mirror a similar step taken by AP3 who recently appointed Axa Rosenberg Investment Management and Batterymarch Financial Management to oversee a total of US$380m in active US small and midcap equities. AP3 has also put aside some e200m-450m for 2 or more managers for active European small/mid caps. Appointments are expected after the summer.
Ifvarsson said: “This (small-cap equities) is an asset class which performed quite well during the last six months. But immediate funding is no guarantee. It is a timing issue. Even when we sign new managers, mandates may remain unfunded until the asset class becomes more attractive.”
Ifvarsson also revealed that AP1 will start a search for a global custodian during the fourth quarter. Incumbent Citibank will be invited to tender. Citibank has been with AP1 since before the new Swedish pension system came into effect in 2001.
Ifvarsson explained that the fund is obliged to review its arrangements by law and the move does not stem from concerns surrounding Citibank’s service.
The new custody mandate will cover all international fixed income and global equity assets, which constitute 22% and 40% of the SEK 117.1bn fund respectively. Swedish assets are already covered by the Swedish banking system, VPC, in an arrangement which is exclusive to AP1.
The new contract is expected to last for between 3-5 years in the first instance. A mandate will be issued once a consultant is in place - a position for which rfps are now invited.
AP1 is looking to appoint one strategic consultant for qualified financial advisory services, including asset liability modelling, manager selection and evaluation, alternative investments, risk management, performance measurement and other financial advisory services.
The initial assignment will be connected to the procurement of a global custodian. The deadline for rfps is July 21. Tenders will be dispatched by August 15. Between 3 and 8 candidates will be shortlisted for the mandate which will begin on September 30.
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