Biodiveristy & Climate Transition in Focus for AP1 ex-CIO

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    After reporting in January that Mikael Angberg had left his post as CIO at Swedish state pension fund AP1 to pursue new adventures, we now have an opportunity to catch up as he is joining former colleagues at sustainability-focused boutique alternatives placement agent Worthwhile Capital Partners.

    Founded in 2018 by CEO Christian Andersson, Worthwhile aims to support a selected range of managers to raise capital targeting sustainable assets. “I’ve known Christian for a very long time,” Angberg starts. “We worked together at Goldman Sachs, in London, and I’ve stayed connected with him, especially since he launched Worthwhile. I also know the other members of the team well, as they are AP fund veterans.”

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    Indeed, Andersson’s strategy in building out his team has been to rely on the expertise and clout of industry veterans. In 2019, he recruited Kerim Kaskal, as he stepped down from his acting-CIO role at AP3 and, in 2022, Bengt Hellström after he left the same pension fund where he worked as Head of Alternative Investments.

    “After spending nine years at AP1, I felt that I had done most of what I had set out to achieve there as CIO. When I thought about what to do next, I picked up the conversation with Christian and the timing felt right,” says Angberg who is officially joining the team on April 1.

    As far as his role is concerned, Angberg expects to be a good complement to the rest of the team. “I believe that the role will involve several aspects that are both interesting and challenging,” he says. “The ‘secret’ behind Worthwhile’s success is that the team is composed of skilled investors with extensive experience in the finance industry. I’m going to leverage my CIO perspective on the strategies that we represent. For example, I can work together with investors to better understand in what context these investments fit within their portfolio. It is an important piece of the puzzle.”

    Worthwhile currently focuses more specifically on private market investments and, Angberg believes, this asset class presents a unique set of challenges at the allocation level. “There are some pitfalls that I can discuss with investors and help them make the right choices. The top-down approach that I have a lot of experience with can be useful in these conversations. I believe that I can play a role in influencing important decisions that go beyond single investments. In an overall allocation context, we can back up the benefits of different investments with a quantitative analysis including, for example, considerations about correlations between strategies and their different risk/return profiles.”

    So far, Andersson has found it difficult to recruit women to the team, but it is not by design, Angberg assures us. “Yes, it’s a problem and a shame, really. I know that Christian would be very happy to welcome MORE women to the team, but we find ourselves in a pool where women are still hard to come by. The team has over-allocated women applicants in the selection process in the past but needs to continue working on it. I hope that future expansions will allow us to become more diverse,” he says.

    Moving to a current topic, Angberg comments on investor accountability given the backdrop of Alecta’s recent woes related to their investment in Silicon Valley Bank. “It is crucial to have good governance and investment processes in place. We used to say at AP1 that we like to invest in things that we understand. This may be easier said than done, especially at Alecta where the equity portfolio is highly concentrated and comes with idiosyncratic risk. I’ve also argued at AP1 that we needed to pick your battleground. Being an international investor with limited resources is difficult. Without proper coverage in the US, for example, we had no way of knowing more than the rest of the market. That’s why we decided to simply buy the market. In Sweden, we have an informational advantage, and we have the resources to be more active and engage in stock-specific focus. I’ve asked myself how many people it would require covering the entire world in a fundamental way. With a given level of resources in a particular geography, picking the right strategy is crucial,” he continues.

    However, Angberg admits, while a quantitative passive approach can be a valid fall-back in public markets, private market investments bring about an entirely different set of challenges. “In private markets, you are locked in for a while,” he remarks. “There is an agency issue. The decision to invest in private markets often sits very high in the organisation, often at the board level, and the lifetime of the investments is longer than the tenure of these individuals or the portfolio managers who will implement the strategy. With private assets, the initial decision makers may no longer be there to deal with the consequences of failed investments,” he remarks.

    One area Angberg finds particularly compelling as an example of the complexity in private investments is the energy transition. “There are lots of opportunities in that area, but they are not necessarily the most obvious ones. Look at the current debate in Sweden about energy prices. Why are energy prices so high? Is the solution in wind? In Solar? These were the early-stage investment themes. Many Nordic institutions have invested in wind power generation. It might be a good opportunity, but wind alone won’t solve the problem. The infrastructure around the power generation also needs to be built out. That includes cables and batteries, for instance. Diversification is also crucial. Having too heavy exposure to one type of power generation isn’t sound from a risk perspective. In any case, it is clear to me that renewable investing requires specialist managers, as it is more of an ‘energy disruption’ than and energy transition, and investors want to end up on the right side of these investments.”

    Angberg believes in promoting a more integrated approach, “a more holistic view where lots of other investment opportunities can appear as a result,” he adds. “The same is true with sustainability in general. Investors get caught up in the theme of the day but it’s important to understand the background and consequences of each theme and forge an independent view. For example, we are now forced to consider the consequence of decarbonisation. How does it impact biodiversity? What are the opportunities in natural capital and biodiversity that can achieve good returns?” he asks.

    Natural capital is an area that Worthwhile is currently studying more carefully. “We will be working on that theme and first, we need to study the subject in depth. We will engage in client conversations, not only related to a strategy. Just like with any other sustainability-related investment Worthwhile proposes, we want to understand what needs the institution has identified and figure out how they should be fulfilled. We will then select and onboard the best managers who can fill this gap in the biodiversity puzzle,” he concludes.

    Image courtesy of Worthwhile Capital Partners
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