PRI in Person: Alecta’s chair and GIC’s loss dominate conference conversations

At the PRI in Person conference, this week in the Japanese capital of Tokyo, the recent events at two major asset owners seem to dominate informal conversations as the issues raise questions many investors could easily face themselves.

The timing may be considered impeccable: just as a pool of global investors and managers gathered in Tokyo to discuss issues around responsible investing, Alecta's chair announced to step down while Singapore's GIC hit the headlines following a decision to walk away from one of its investments at a major discount.

The resignation of Ingrid Bonde, confirmed only yesterday, as chair of Sweden's largest pension fund was a popular topic of conversation during last night's networking reception in downtown Tokyo, organised by the Principles for Responsible Investment (PRI), the UN-backed group that pushes for responsible investment standards and is organising this week's conference.

Bonde announced to depart as regulators in the Scandinavian country said they plan to deepen and sharpen their probe into a range of Alecta investments which ultimately led to losses of close to $2 billion.

"In a situation where there has been too much focus on my person, I decided to resign," Bonde said.

Her resignation comes only months after she fired Alecta's CEO, Magnus Billing, when the fund emerged as one of the biggest investors in the collapsed U.S financial institutions Silicon Valley Bank and Signature.

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The fund's decision to invest billions in both banks was questioned by delegates at the PRI event. 

In particular Alecta's model of concentrating on just a few large investments was subject to debate, with some conference attendees concluding that such an approach is too risky and not in the best interest of Alecta's members.

"Too risky, outright irresponsible," as one UK-based manager put it.

The fund reportedly started acquiring shares in the Silicon Valley Bank's parent company, SVB Financial, as well as Signature Bank as early as 2017. 

Alecta continued to increase its stake, becoming SVB Financial's fourth-largest shareholder by the end of last year. In March, the two banks collapsed, with a $2 billion loss as a result.

Meanwhile, another widely-discussed development at the PRI event was an issue that has dominated business headlines across Asia in recent days, namely the decision by Singapore’s sovereign wealth fund GIC to sell off its stake in Vista Equity Partners. 

GIC was reportedly in a rush and disposed its $300 million stake at a significant discount, incurring a major loss, following a tax scandal that involved the buyout firm’s founder, Robert Smith.

The $769 billion sovereign wealth giant's decision to sell up and run, and thereby accept a loss, was seen as "extremely unusual", as a Malaysia-based delegate put it, since interests in buyout firms are rarely sold for reputational considerations or responsible investment reasons, he explained.

But tax evasion allegations in the U.S, which led to a $139 million settlement between Vista founder Robert Smith and the U.S. tax authority, the IRS, seemed a bridge too far for GIC.

And it was not just the Singaporean group that decided to drop Vista: London-based Wellcome Trust, a major investor with close to £36 billion in assets under management, also decided to sell its stake.

When approached by Net Zero Investor, both Alecta and GIC declined to comment.

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