Stockholm (HedgeNordic) – In early 2024, Jonas Thulin assumed the role of Chief Investment Officer at the Third Swedish National Pension Fund (AP3). Known for his tactical-oriented approach to asset allocation, honed during his tenure as Head of Asset Management at Erik Penser Bank and Head of Asset Allocation at Nordea Wealth Management, Thulin has been working on integrating his tactical mindset into AP3’s long-term strategic approach.
“I believe that my background, which leans more towards more tactically heavy than strategically heavy, has certainly added insights into the fund,” Jonas Thulin shares with HedgeNordic. “Even for long-term, strategically oriented investors, there is merit in adopting a tactical mindset, particularly from a market analytics standpoint,” he elaborates. “Even with a long-term strategic asset allocation, it’s important to identify triggers that signal when to adjust the weighting of major asset classes, whether to overweight, underweight or maintain a neutral stance.”
“I believe that my background, which leans more towards more tactically heavy than strategically heavy, has certainly added insights into the fund.”
Thulin has been collaborating with the team at AP3 to rebuild many of the analytical tools he has relied on for decades. “Many of the analytical toolkits have been redesigned and rebuilt by me, with some elements of this methodology tracing back to the 1990s,” notes Thulin. During his extensive investment career, he has relied on his proprietary quantitative framework, which includes the analysis of technicals, fundamentals, economic indicators, flows, liquidity, and valuation metrics. This framework allows him to address questions such as when to reassess strategic asset allocations, when to adopt a more bullish or bearish stance, and where to focus bullish investments. “We can approach these questions from multiple angles and quantify our analysis accordingly.”
“We have a very strong bottom-up approach at AP3, with strong teams specializing in fixed-income, equities, and alternatives, analyzing investments from bottom-up to build out the exposure.”
Like other large institutional investors in the Nordics, AP3 is characterized by its long-term investment horizon and relies on strategic allocations across a diverse range of traditional and alternative asset classes. The allocation to each asset class is built on an ALM (asset and liability management) analysis and individual investments use a bottom-up approach, evaluating investments on a case-by-case basis. “We have a very strong bottom-up approach at AP3, with strong teams specializing in fixed-income, equities, and alternatives, analyzing investments from bottom-up to build out the exposure,” explains Thulin. “These teams have consistently outperformed benchmarks over several years, so there is a very strong culture of expertise in bottom-up analysis,” he adds. “In my role as CIO, I bring a complementary top-down perspective to our investment strategy.”
The Implementation of Tactical Adjustments
Despite incorporating a new tactical element in the investment approach, Thulin emphasizes that both strategic and tactical decisions are executed in a “very strict, systematic and methodical manner.” While strategic decisions continue to be informed by asset liability considerations and remain largely unchanged, “our focus is on enhancing the tactical top-down perspective.”
“…our focus is on enhancing the tactical top-down perspective.”
The tactical decisions predominantly involve the use of derivatives. “When we intend to increase the equity weight, instead of shifting and withdrawing cash from people’s mandates, we opt to maintain the existing allocations as much as possible and utilize derivatives to push the fund’s exposure in the direction we want,” explains Thulin. Upon assuming the role of CIO at AP3 in early 2024, Thulin made the strategic decision to increase equity exposure. “We increased the equity bets to benefit from the strong tailwinds in equity markets this year,” he highlights. “Looking back over the past ten years, the beginning of 2024 has been one of the best starts for AP3, thanks to the increased equity bets.”
Thulin and his team at AP3 are shying away from traditional broad market indices to adjust exposure, opting instead for more specific equity positions with the use of derivatives. “Rather than investing in broad indices like Nasdaq or S&P 500, we are looking a more nitty-gritty types of exposures,” says Thulin. “Drawing from my background, I’m accustomed to taking targeted positions. For instance, we’re investing in narrow equity segments within the US, and I believe that is something that will keep growing as we move away from broad index exposure.”
“I would express myself within the alternative space differently from what our team is doing. This is meant to complement each other, not to substitute each other.”
The tactical decisions can extend to asset classes beyond equities, including fixed-income and alternatives. “Alternatives also fall within my mandate as CIO, so we can explore options within that space as well,” says Thulin. However, AP3’s investments in alternatives, such as forest, private equity, or real estate investments, are inherently long-term, as the commitments in these areas are long-term, according to Thulin. “When evaluating opportunities from a tactical perspective, I might consider securities that are traded on exchanges,” he explains. “In such cases, I would express myself within the alternative space differently from what our team is doing. This is meant to complement each other, not to substitute each other.”
“The core asset management within AP3 has such a strong track record and strong history,” concludes Thulin. “Our aim is to preserve and enhance that legacy. The top-down, tactical perspective I am bringing to AP3 is only intended to complement, never to substitute anything.”
