US-based investment manager Pimco wants to grow its Nordic business by 10-15 percent annually, according to the head of Nordics and Benelux Patrick Dunnewolt.
"We realize this is ambitious but we think Pimco is still undervalued given the case for active management in fixed income has never been stronger," he says in an interview with AMWatch.
To achieve this ambition, Pimco will increase emphasis on growth within wholesale, alternatives and ESG strategies. In addition, the USD 2.02-trn asset manager aims to further diversify its regional book of business.
"We want to continue strengthening our current position in traditional strategies but also focus on alternatives and strategies designed to harvest more complex risk premia," Dunnewolt explains.
Valuations are quite stretched. Investors need to diversify their investments and look for opportunities in the alternatives area. Harvesting these complex risk premia requires strong analytics, portfolio management and risk management capabilities
Betting on banks
While roughly 90 percent of Pimco's book of business is from institutional clients, the last 10 percent is in the wholesale space – but Dunnewolt wants the latter to grow further. Part of the strategy revolves around working closely with the regional banks and distributors.
"Some of these banks are looking to reduce the number of managers they work with, and Pimco is well placed to be a strategic partner in fixed income, as we offer many strategies that are complementary to the banks’ internally managed funds," Dunnewolt says, and adds:
"We need to make sure that Pimco is on their radar too."
Dunnewolt hired Henrik Grunditz last year to focus on the banks and make sure to stay in frequent contact with the right people.
"An entity like SEB, for example, is quite complex to navigate, with multiple departments including Investment Management, Life and Pension and Baltics to name a few," the Nordic head explains.
The ambition is to explore growth through all channels within the banks – recommended fund lists, white label fund collaborations, but also within the multi manager platforms and associated life and pension businesses.
"We've put a very structured process in place to develop this segment of the market. In addition our wholesale business will also increasingly focus on regional wealth managers, fund platforms and family offices," says Dunnewolt, who manages a team of 15 people of which most are based in London.
The low yield environment is forcing investors further out on the risk and liquidity spectrum, as well as further from their home turf of Nordic or European investments
Higher yielding strategies
As government bond yields are negative for the majority of developed countries, Pimco's institutional clients are turning to globally diversified and higher yielding strategies. Notably, investment grade, high yield, private credit and emerging market debt, Dunnewolt says.
"However, with the low yields in government bonds, investment grade or high yield, investors can’t rely on beta only to do the heavy lifting in fixed income, the alpha component will become even more important going forward" he says and adds:
"Valuations are quite stretched. Investors need to diversify their investments and look for opportunities in the alternatives area. Harvesting these complex risk premia requires strong analytics, portfolio management and risk management capabilities."
According to the experienced business developer, Nordic investors are sophisticated and has increased in-sourced in those asset classes they considered most likely to achieve better outcomes by investing themselves. However, given the low yield environment, investors look to diversify their exposure - and this is where Dunnewolt believes Pimco can add value.
"Competition within mainstream fixed income strategies is considerable, both from asset managers and the strong internal capabilities of many large institutions. However the low yield environment is forcing investors further out on the risk and liquidity spectrum, as well as further from their home turf of Nordic or European investments," Dunnewolt says.
The third pillar of Pimco's growth ambition is to see more demand in its ESG offering, Dunnewolt says, mentioning a newly-launched global climate bond fund.
"We see a very large focus on climate change and carbon intensity and investors looking to reduce their impact through active implementation of the ESG tools at Pimco," he says.
Earlier this year, Pimco was awarded the single largest mandate by Danish pension fund Industriens Pension worth DKK 8.9bn invested into a segregated mandate sustainable bond fund. The fund has exclusions, ESG integration and reducing carbon intensity.
"We continue to have extensive discussions with our Nordic clients on ESG optimization and implementation. Providing Nordic institutions with customized solutions based on their views is paramount to being successful," Dunnewolt says and continues:
"I am confident that Pimco's strong track record in ESG investing will attract more business going forward."