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Boston Newsletter: September



An ocean apart? Differences between institutional investors: Nordic vs. US

The latest newsletter from Boston focuses on some of the differences between institutional investors in the Nordic region and institutional investors in the US. Despite operating within different regulatory framesets and having different input and demands from stakeholders, some investment perspectives are very similar in the two regions while others differ significantly. Some of the largest differences are highlighted below.



The overall interest in equity investments remains at a high level in both regions. Despite the challenges from stressed valuations, market volatility and new regulations, the interest is still present. In the Nordic region the interest in Global Equity mandates is still high albeit currently a little lower than during the previous years. In general Nordic investors have had a global approach to equity mandates. In the US, some of the larger institutional investors have also implemented a global mindset to equity mandates. However, a regional approach to equity is still very widespread, and EAFE products are still very common, although these have never won recognition in the Nordic region.


Looking at the exposure to market cap size, the US investors have a tendency to have dedicated small, mid and large cap mandates, whereas Nordic investors typically have had an exposure to the larger cap companies. Recently we have seen a change in this, and especially Danish and Swedish investors have increased their opportunistic exposure to small cap segments of the developed markets, which is primarily due to better alpha opportunities in these segments:


“Not a whole lot has changed in our foreign exposure. We mainly invest in global equity. We did add some EU small cap because we wanted some additional European exposure with alpha potential.”  - Icelandic Investor


For years, Nordic investors have had exposure to emerging markets equity, and currently the interest in new mandates remains high although the interest seems to have peaked. US investors have historically been underweight emerging markets equity, but they have over recent years picked up on the interest and allocated further to the asset class. Recent events in Europe with “Brexit” have further helped this allocation increase along.


Fixed Income

The low interest rates have highly affected investors on both sides of the ocean and their interest in fixed income asset classes. While the low interest rates have decreased the interest of high grade bonds, investors are still required to allocate assets hereto because of the need for liability hedging and the need to own secure assets. The search for yield has led investors to less covered and more risky fixed income assets such as high yield bonds. Both Nordic and US investors have increased interest in high yield bonds. Alternative fixed income asset classes such as senior bank loans, CLOs and direct lending have also seen significant increases in interest. However, some Nordic investors are not willing or able to invest in direct or private lending mandates or other credit asset classes with long lock up periods despite having long term obligations. These long term obligations are not always as well defined as some US investors, especially Endowments, which for some plans know their liabilities 5, 7 or even 10 years out in the future and therefore can have longer lock-up periods resulting in higher yielding asset classes within fixed income.


Interest in emerging market debt has slowly been decreasing over the last years in the Nordic region albeit still with high indication of future mandates, as some investors look to replace current managers or potentially add new managers. The decreasing trend among Nordic investors should be seen in regards to a relatively high absolute allocation to emerging market debt, and Nordic investors were some of the first to invest significant assets to the asset class. The majority of investors will therefore also have an allocation in their portfolios:


“We are long termed on EMD and believe in opportunities in local currency.” – Norwegian Investor


For US investors, the picture is not the same. Similar to the emerging market equity exposure, some US investors have had an emerging market debt exposure for years, but this has been significantly lower than some Nordic investors, and some US investors have not had any at all. With recent turmoil surrounding “Brexit” in Europe US investors have increased demand for the asset class recently, and the “Brexit” noise has certainly pushed this trend along.


Overall, recent trends among Nordic and US investors point to the fact that the ocean between the two is becoming smaller, and that overall tendencies in investment strategies for equity and fixed income, despite different regulation and stakeholder input, are converging in some respect to have more similar features in terms of asset allocation. There are still distinct differences, but they may not be as outspoken as before.


Our findings in the Nordic market are based on our recently published Nordic Intelligence. Should you have further interest in the Nordic and European market please do not hesitate to contact Jan Willers ( or Henrik Hoffmann-Fischer ( in our Danish office or Martin S. Nielsen ( in our Boston office.


Copenhagen Office
Kristen Bernikowsgade 6, 2.
DK-1105 Copenhagen
Phone: +45 3391 9050

Boston Office
225 Franklin Street
Suite 2600
Phone: +1 617 217 2840

About Kirstein A/S

Kirstein A/S advises asset managers on how to strengthen their business and has consulted some of the largest Danish and international managers through more than a decade. We function as a strategic and operational partner, and our collaboration is customised to the needs of the individual manager. Our consultants are all investment professionals, and working with us means gaining access to direct and personal advice.

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