New Alecta Chair Addresses Pension Fund's Confidence Crisis

Sweden’s largest pension fund, Alecta, is on the path to recovery from what its new chair describes as a significant loss of trust. Carina Akerstrom, formerly CEO of Svenska Handelsbanken AB, addressed the fund's supervisory board in Stockholm, acknowledging the challenges posed by investments that were deemed inappropriate.

During an extraordinary meeting following her appointment, Carina Akerstrom highlighted Alecta's commitment to regaining confidence after experiencing difficulties stemming from questionable investment decisions.

“My assessment is that the board and CEO have implemented the measures that are required to start rebuilding trust,” Akerstrom said. She added that this had been “painstaking and methodical work, but all to get us out of the crisis.”

Alecta, responsible for managing 1.2 trillion kronor ($116 billion) in retirement savings for approximately a quarter of Sweden's population, faced scrutiny a year ago due to its risky investments. Notably, the fund's involvement with the now-defunct Silicon Valley Bank in the US garnered attention. This and other unsuccessful investments resulted in losses totaling around $2 billion, prompting the departure of several senior executives and triggering an investigation by the country's financial authorities.

However, Alecta's challenges did not end there. Concerns emerged regarding the fund's substantial investment in heavily-indebted landlord Heimstaden Bostad AB. Alecta invested $4.6 billion to acquire a 38% stake in the company, which is now facing difficulties in selling properties amidst credit-rating downgrades and a significant increase in borrowing costs.

One of the key tasks for Akerstrom, who assumed the role in January, is addressing the funding requirements of Heimstaden Bostad. Additionally, she must renegotiate an unfavorable shareholder agreement with the company's co-owner, Norwegian billionaire Ivar Tollefsen. Alecta's stake in the landlord is currently under investigation by prosecutors and Sweden's financial watchdog, adding to the challenges faced by the new chair.

The appointment of Akerstrom followed the abrupt withdrawal of Lars Rohde's nomination for the position, citing a conflict of interest. Rohde, the former governor of Denmark's central bank, was set to accept a nomination for a board seat at Nordea Bank Abp, the largest lender in the Nordic region, which also engages in pension procurements. This unexpected reversal has raised questions about the adequacy of the fund's due diligence process. According to Kenneth Bengtsson, chairman of the supervisory board, Rohde did not recognize the conflict of interest based on advice from Nordea's legal experts.

“That might make sense from their point of view as pensions are only a fraction of their business,” Bengtsson said in an interview. “But to Alecta, pensions are everything. We can’t have a chairman who has to recuse himself every time we discuss a procurement.”

In response to a series of scandals, the fund has undergone significant changes in its management and board composition. Akerstrom assumes the role following Jan-Olof Jacke, who stepped in as chairman after the resignation of Ingrid Bonde in October. Peder Hasslev, the current CEO, took over in September following the departure of Magnus Billing in April.

Next week, the fund is scheduled to release its full-year results, which will include an updated assessment of its investment in privately-owned Heimstaden Bostad AB.

Source: Bloomberg