Swedish Pension Fund Chief Tries to Placate Savers Angry Over $2 Billion Losses

The chief executive officer of Alecta, Sweden’s biggest pension fund, has reassured clients that the company is financially solid despite a failed investment strategy in the US that wiped out almost $2 billion in retirement savings.

(Bloomberg) — The chief executive officer of Alecta, Sweden’s biggest pension fund, has reassured clients that the company is financially solid despite a failed investment strategy in the US that wiped out almost $2 billion in retirement savings.

“What has happened has practically no impact on Alecta’s customers or Alecta’s financial position,” CEO Magnus Billing said in the fund’s latest annual report, published Wednesday. He went on to describe the impact of the trades as “small, in part since the losses equal less than 2% of our managed capital.”

The losses at the pension fund overseeing the savings of 2.6 million Swedes stem from last month’s banking crisis in the US, where Alecta was among the largest shareholders in Silicon Valley Bank parent SVB Financial Group, Signature Bank and First Republic Bank — two of which have since collapsed and the third is still struggling to survive.

No other pension fund had bet on the three lenders to the extent that Alecta had. A spokesperson for the fund has since said it does not expect to recover any of its investments in SVB and Signature, and that Alecta has sold its First Republic holding at a loss.

“I have thorough understanding and respect for the fact that our customers and other stake holders are angry and disappointed in us,” Alecta’s CEO said.

The debacle sparked outrage among ordinary Swedes who have taken to social media in their droves, aggrieved at what they see as risky betting by a pension fund entrusted to manage $116 billion in savings. Fueling the anger has been a recent decision by the fund to exit its holdings in domestic lenders Svenska Handelsbanken AB and Swedbank AB.

“The money Alecta manages is pension money,” Joel Stade, an adviser at advocacy group Swedish National Pensioners’ Organization, said in an interview last month. “It’s potential salaries that have been set aside for this. It’s peoples’ wages.”

The fallout from the failed bets led to a summons from the country’s financial watchdog while both the government and central bank have said they are monitoring the situation closely. For its part, Alecta this week promised to cut back on risk taking “far away from home” and placed its head of equity portfolio management, Liselott Ledin, on leave.

But the decision to only remove the manager responsible for stock investments — combined with outspoken remarks about Ledin from Alecta’s chairman in local media on Tuesday — has done little to lighten the mood among savers. 

“A chairman who singles out an employee and publicly calls this person incompetent is almost unheard of,” Louise Bringselius, an associate professor at Lund University, said in an interview. 

Bringselius described the move to put the stocks chief on leave as “an empty gesture that risks creating a culture of silence and fear that will paralyze the organization.” 

Ledin did not immediately respond to a request for comment when contacted by Bloomberg News.

Alecta’s handling of Ledin also drew sharp criticism from lawyers representing Unionen, one of Sweden’s largest trade unions. “It seems like an act in some kind of panic to show that you’re doing something and this person gets stuck in the middle,” Lena Maier Soderberg, general counsel at law firm LO-TCO Rattsskydd, told newspaper Dagens Industri.

“This is a staff matter that should not be handled publicly. It’s inappropriate to handle it this way,” she said.

 

 

 

(Adds comment from union’s legal representative.)

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