US$2 billion loss at Sweden’s pension fund has stocks chief put on leave

THE fallout from almost US$2 billion of investment losses at Sweden’s biggest pension fund gathered pace on Tuesday (Apr 4) as Alecta put its equities chief on leave and announced it would scale back large stakes in companies far away from its home market.

In taking action, Alecta is seeking to build trust and ensure customers refrain from switching to rival funds, after it became entangled in a US banking crisis that has seen two lenders collapse and a third struggling to survive. 

Over the past six years the fund built up its holdings to become one of the largest shareholders in Silicon Valley Bank parent SVB Financial Group, Signature Bank and First Republic Bank. It’s since said it expects to recover no part of its investment in SVB and Signature, and has sold its First Republic holding at a loss.

“The losses in the US banks have seriously damaged customers’ trust in Alecta and its equity management,” said Alecta chief executive officer Magnus Billing in a statement.

The equities chief who was responsible for the investments, Liselott Ledin, has been placed on leave, according to spokesperson Jacob Lapidus. The fund named Ann Grevelius as its acting head of equity portfolio management.

“It’s now up to us to prove that we deserve customers’ trust again,” Billing said. “Alecta’s equity management needs a fresh start and a new management.”

No other pension fund had bet on SVB, Signature, and First Republic to the extent that Alecta had. Given the fund manages the money of 2.6 million private savers in Sweden, the news has stoked public outrage in Sweden – particularly since Alecta recently exited stakes in two local lenders, Svenska Handelsbanken and Swedbank , and chose to invest in the niche US banks.

With 1.2 trillion kronor (S$154.1 billion) of assets under management, the US bank losses won’t impact Alecta’s solvency ratio, but the fund has still kicked off an internal investigation into its investment processes, and received a summons from the country’s financial authority.

Alecta’s biggest foreign holding at the end of last year – the most recent public data – was Microsoft, with 5.2 per cent of the fund’s equity portfolio invested in the stock. Alecta also had 4 per cent of its portfolio in Google parent Alphabet and 3 per cent in TJX Cos, a retailer of off-price apparel and home fashions.

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Ledin, the executive placed on leave, is a 28-year veteran of Alecta, who started at the fund as a financial analyst in 1995, according to LinkedIn. Since then she worked in a number of roles including portfolio manager and head of equity research.

She’d held the job of head of equity portfolio management since late 2019, and oversaw a growth in Alecta’s allocation into the niche banks, even as the fund had opened the positions in 2017 to 2019. BLOOMBERG