Subscribe | Log In

Related

Nordic Demand for SFDR Mandates Accelerates in Q2

Share post:

Stockholm (NordSIP) – While the fortunes of AI companies appear to have brought global markets back to their means during the summer, institutional investors continue to search for asset managers to fulfil their investment mandates. According to Global Fund Search (GFS), a ‘search platform’ for institutional asset owners, the second quarter of 2024 saw institutional investors publish more requests for proposals than in the previous three quarters.

Searches for sustainable mandates, whether SFDR-specific or otherwise also increased during the second quarter of 2024, particularly in the Nordics where the search for Article 8 and Article 9 funds accelerated and the search for funds without sustainable factors was at a 12-month low.

Global Trends

According to data published by GFS, the second quarter of 2024 saw a 42% increase in the number of searches vis-à-vis the first quarter. This is equivalent to a 29% increase from the number of searches published during the second half of 2023.

“The demand for active equity mandates remains strong. While there has been a focus on ‘growth’ in recent years, investors are now showing more interest in defensive equities such as core mandates and exposure to non-cyclical companies with strong cash flows. There is also an increased appetite for absolute return and tail risk strategies, with some current live mandates in this area,” says Björn Edlund-Persson, Head of institutional clients, Nordics & Benelux at GFS.

“In Private Markets, there is a growing interest in ‘solutions’ where LPs outsource the management of their private markets exposure to a GP. The GP has the discretion and requirement to use both their own and third-party funds in the portfolio. The main driver for outsourcing seems to be the costs and closing a competence gap. Overall, there is strong demand for alternatives, particularly notable in Q2 infrastructure across both equity and debt instruments,” Edlund-Persson adds.

The View From The Nordics

Notwithstanding the global trends, institutional investors appear to have cooled down in the Nordics. Of all the searches for mandates published on GFS’s platform in the second quarter of 2024, only 19% originated from the Nordics, considerably less than those published in the quarter prior, when Nordic institutional investors represented over half of the searches. Nevertheless, according to GFS the Nordic region is growing compared to last year and the year before, considering the number of searches year to date.

Demand for asset managers has come from all Nordic countries, but Danish asset owners appear to be particularly prominent on the platform, followed by their Norwegian and Finnish counterparts.

Sustainable Mandates Take Over

According to the GFS data, approximately 41% of the searches published on the platform did not include any ESG guidelines in the second quarter of 2024, down from 26% in the first quarter of the year. Another 22% of searches did not specify any Sustainable Finance Disclosures Regulation (SFDR) category but included ESG guidelines requesting proposals for strategies that were “ESG Aware”, “ESG incorporation” or that “focus on sustainability”. The remaining 37% of searches made specific requests for the strategies to comply with Article 8 and Article 9 SFDR criteria, the highest level for the last 12 months. Overall, the global search for sustainable mandates accelerated again in 2024Q2, after slowing down for two consecutive quarters.

The landscape was slightly different in the Nordics. Although the same trend for non-sustainable funds is reflected in the region, with a hump in 2024Q1, Nordic sustainable searches for SFDR Article 8 and 9 funds are not as high as they were at the end of 2023Q3. Nevertheless, the second quarter of 2024 saw an uptick in demand for Article 8 and Article 9 funds to their highest level in 6 months .

The relative figures hide the previously-mentioned growth of total fund searches on the platform to their highest level over the last 12 months. Indeed, the situation of Article 8 and Article 9 fund searches in the Nordics is all the more encouraging when compared with the absolute figures for global sustainable funds. While the total number of funds without sustainable factors specification has consistently increased over the last 12 months and reached its peak in 2024Q2, such searches among Nordic asset owners reached a 9-month low in 2024Q while their total number of Article 8 and Article 9 searches reached its highest level in 12 months in the second quarter of 2024.

While there has been a well-documented backlash against ESG integration since the start of 2023 and although there has been some political pushback against environmental regulations in Europe, asset managers generally communicate that this phenomenon has not spilled over from the USA and that European asset owners remain committed to sustainability. In the Nordics in particular, it seems that this trend is still holding.

Image courtesy of Moshe Harosh from Pixabay

From the Author

Recommended Articles