Murray Bender: RBC Investor & Treasury Services is pleased to present insights on the opportunities and challenges facing the financial services community. Today’s podcast features Kerstin Lindgren, Director of Global Client Coverage at RBC Investor & Treasury Services in Luxembourg in conversation with Johan Wahlman, Managing Partner and Co-Founder of Stockholm-based asset manager House of Reach.
Kerstin Lindgren: Thanks for joining us, Johan.
Johan Wahlman: Happy to be here.
Kerstin Lindgren: Perhaps you could start by providing a bit of background on House of Reach.
Johan Wahlman: Well, House of Reach was founded of me, Peter and Fredric as an initiative that we—we have all been buyers of cap intro services. Third-party markets as a whole. We haven’t been satisfied with the processes or the results. It’s probably connected in some way. So we wanted to create a company which we would have in our previous positions as running businesses in the Nordics would have been willing to engage and help us broadening our strategies in the funds that we have been working with in the past. That is sort of the background.
We are nine people now in the House of Reach. We are from people locally in Stockholm which is the sort of central globe of things. We have one guy in Copenhagen; hopefully, two. We have one person in Norway and we are about to sign a person in Helsinki as well so we can cover all the four major Nordic countries.
Kerstin Lindgren: In your experience, are there any key trends or key characteristics of funds that are successfully acquiring investors in the Nordic region?
Johan Wahlman: Yes. When talking about the Nordic region, it differs because it’s different countries and different development philosophies, but I would say that the general trend that we definitely see is the focus on ESG and sustainability. And in addition to that, there’s a strong focus on different types of alternative asset classes. Everything from infrastructure to clean energy and forests, not to say the least. Maybe that is a typical Scandinavian thing, but we definitely see them on from that.
The challenge that we see though is that some of these managers are either/or a combination of them, too small or too new. And the other thing that we can see is a strong demand of operational capabilities. The Nordic institutional investors have a tendency to dislike, for example, real asset managers that are mostly bankers, guys in suits. So they prefer that they have an operational background, not just only a banking background.
Kerstin Lindgren: You touched a little bit on the fact, we talk about the Nordic regions but they are separate countries in the Nordic region. What would be the significant differences that you see between the various Nordic countries in terms of fund distribution?
Johan Wahlman: Well, we’re talking about four different countries with different cultures, different investment cultures, different currencies, and also the differences in market size with Sweden being the biggest market. So all of this combined needs to—put some pressure on someone who wants to be successful in the Nordics. You need in a certain way to adapt to different types of investors and different needs. For example, Sweden only—I read somewhere that it is eighth-biggest fund market in the world and also very much of an equity country. While in contrast to that Denmark, for example, is very much focusing on fixed income. So it’s a very different approach to different countries that you need to apply in order to be successful. But if you do it in the right way, it’s a great market to be active in for a skilled manager.
Kerstin Lindgren: And are there any structural considerations that you would like to highlight that are important to support a successful fund distribution in the region?
Johan Wahlman: Well, to optimize the potential, I would say that you need to be—you need to have your strategy in an EU-regulated vehicle which just normally means that you need to be in Luxembourg or Ireland. You can, of course, still see some potential in, for example, Cayman and Delaware structures as well, but it’s a very small portion of the market that nowadays have the capability to invest in such vehicles. And of course, there’s always also the potential of setting up local funds in the—in each country but that is not something that we see a great deal of these days.
Kerstin Lindgren: Interesting. Is there any key advice that you would like to provide to a manager that is considering to set up fund distribution in the Nordic region?
Johan Wahlman: I would say that the first thing one needs to do is to do one’s homework basically. You need to think about these markets to educate yourself of what is the potential in each specific. Maybe it’s not all the Nordic countries that you need to have something that is suitable for. Maybe it’s just a couple of the countries. And so start with the homework. Understand the investor because we’re talking about quite sophisticated institutional investors in each of the Nordic countries. And by that, by saying sophisticated, I mean that they have a lot of know-how and resources in-house. They are not that depending on advisors, consultants, for instance. They do a lot of the real manager selection part themselves and they know what they’re looking for. So start with the homework. That is key.
And then the second advice, I would say that you need to be long term. There are very rarely any quick wins here in the Nordics. But the positive side of that is also that the clients, the investors you talk to here, they are also quite long term in the sense that they are—you can look at sticky money in a different way because if you say—if they like you and they—and you continue to do what you’re saying you’re supposed to do, they will probably be a client of yours for a long, long time. But you need a long-term perspective in order to be successful in this market. And just reflect on your value add by understanding the investor.
So that is key. And that is the problem I often see when people go and sort of have a hit-and-run tactic. You are not that successful with that because it’s all linked to the complexity in the markets. But if you have—if you do your homework, it’s a fantastic market to be in and also quite fun because the dialogues you have with some of the sophisticated investors like, for example, starting from the biggest ones, the petroleum fund in Norway run by NBIM to the Swedish AP funds and Finish funds and so forth, down to also very—sometimes forgotten at here is the smaller institutions that is run by one or two guys. They’re still there and they are quite attractive, I know, but still also quite sophisticated in some ways. So please don’t hesitate in order to the Nordics but do your homework. That is my strong recommendation.
Kerstin Lindgren: Thanks for sharing your insights on fund distribution in the Nordics, Johan. We really appreciate your time.
Johan Wahlman: Thanks. Likewise. Please reach out if there is anything we can do.
Murray Bender: Today’s podcast has been brought to you by RBC Investor & Treasury Services. We hope you found it useful. For additional insights on topics relevant to the financial services community, including our previous podcasts, visit rbcits.com/insights.
I’m Murray Bender. Thanks for listening.
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