After a year when assets under management nosedived 14 percent, Nordea Asset & Wealth Management is setting clear priorities for 2019. The overarching goal is to strengthen its market position on the Swedish and Norwegian markets for private banking and life and pensions.
Nordea's head of AM takes stock of 2018 after AuM took a nosedive
The first steps towards this target have been going on for the last couple of years, with the now Finland-based financial institution having used much of its advisory resources into improving internal processes, according to Snorre Storset, head of Asset & Wealth Management.
"In 2019, we can fully focus on improving our customer offering and be more proactive. We are recruiting more personnel in the form of private bankers and daily banking advisers. The additional staff and freeing up existing capabilities is one of the initiatives to increase our presence in Sweden and Norway," he tells AMWatch.
In 2018, the number of staff at Nordea private banking fell by one to 847. Conversely, the figure at the asset management division rose to 800 from 742.
Nordea's AM business deepens footprint in Norway and Sweden
Conquering Sweden and Norway
According to Storset, the neighboring Nordic countries represent two of the fastest growing markets for private banking in all of Europe — let alone the Nordics.
This development is partly driven by a relative high number of entrepreneurs. Several of these entrepreneurs are already corporate customers at Nordea, Storset says. Therefore, he sees much growth potential in the segment for business founders who eventually become potential private banking customers.
In addition, he adds, Nordea's current private banking business in Sweden and Norway is still relatively small compared to the goal. The ambition to focus mainly on the Nordics took a big leap in last quarter of 2018, when the international private branch based in Luxembourg was divested to Swiss-based UBS.
Another strategic target for 2019 is to increase business reach in the life and pensions segment in Sweden and Norway.
“Historically, we have had a very small market share in the corporate segment. In Sweden, we haven't discussed occupational pensions with many of our corporate customers so there's a lot of growth potential in this market by offering some strong packaged products," Storset says.
Nordea divested its Danish pensions unit in 2017, and the business has now been renamed Velliv.
In order to increase business in the Nordics, a wide array of responsible investments products emerge.
At Nordea AM, the priority is to widen EUR 283 billion money manager's offering of products with an environmental, social and corporate governance (ESG) focus as these products increasingly attract attention from both institutional and retail clients. Younger customers — seen as the asset owners of the future — are the main drivers of this development.
In the first weeks of 2019, two additional Stars funds launched: A European corporate bond strategy and latest an emerging market debt strategy.
"It is a privilege to integrate ESG into our investment style"
Storset plans to increase the offering of Stars products in order to provide investors a holistic ESG portfolio:
"We will continue to launch the ESG-titled products an investor needs to build a fully ESG-enhanced portfolio across asset classes," he says, and adds:
"The last three years we have been launching the Stars funds as customers increasingly want their whole asset management mandate in an ESG format. This development has particular been driven by the pension funds."
The expanding universe of Stars funds will not result in a mass closing of traditional mutual funds. Instead, Nordea's advisory staff will have training on matters in relation to sustainable finance in 2019. One of its purposes is to advise clients on the differences between the regular funds and Stars funds.
"We will still offer our regular Nordea mutual funds. We have many types of clients and we need to cater for them all. They can, therefore, decide whether they want the traditional funds or the ESG-tilted funds," the AM unit's chief says.
In 2018, Nordea also bought 40 percent of the shares in the Swedish-based hedge fund boutique Madrague Capital Partners. This resulted in a European long/short fund, which was launched last December. The partnership means that the original investment team is still in place, while Nordea uses its distribution capabilities in the offering of the fund.
As investors are becoming increasingly willing to accept less liquidity in exchange for positive return, Nordea will be looking for similar partnerships in the illiquid space. However, he says: ”Nothing concrete is on the table at moment."
Nordea mulls development of hedge fund for Stars range