The NSK said, “Nordea did not adequately investigate the bank’s Russian clients’ transactions and ignored warnings about foreign exchange transactions in Copenhagen.”

The indictment covers transactions totalling just over 26 billion krones (approximately €3.5bn).

The prosecutor’s office claimed this is the largest money-laundering case in Danish history.

Nordea said in a reaction statement on 5 July: “Following investigations conducted by the authorities into anti-money laundering controls in 2015 and earlier, the Danish National Special Crime Unit has announced that it will commence court proceedings and file a formal charge. Nordea does not agree with the legal assessment made by the authorities, a position supported by three separate external legal assessments, and maintains that the bank is adequately provisioned based on current circumstances.

“As previously disclosed, Nordea expects to be fined in Denmark for weak anti-money laundering processes and procedures in the past and has made a provision for ongoing anti-money laundering matters. The Danish Financial Supervisory Authority investigated in 2015 whether Nordea Bank Danmark A/S had complied with applicable anti-money laundering regulations in terms of having adequate processes to identify and combat money laundering.

“The investigation led to orders by the Danish Financial Supervisory Authority with no mention of specific money laundering, nor any findings related to intentional breaches of the applicable legislation, and no individuals were accused of any wrongdoing.”

The bank’s statement continued: “In June 2016 the matter was referred to the Danish Prosecution Service for further investigation in accordance with Danish practice.

“Today the National Special Crime Unit has announced that it will commence court proceedings against Nordea in Denmark in this previously disclosed anti-money laundering matter. Based on Nordea’s interpretation of Danish law, Nordea does not agree with the content of the charges nor the legal assessment.

“In Q1 2019 Nordea made a provision for anti-money laundering-related matters and has reviewed the provision level on an ongoing basis. Based on current circumstances, and supported by three separate external legal assessments, Nordea believes that the current provision is adequate to cover this matter.

Nordea further said it had “continuously sought a resolution”: “Nordea has been working transparently with the Danish authorities for close to nine years and will await a decision by the courts.

“In recent years, Nordea has invested heavily in fighting money laundering and other financial crime and collaborates closely with the authorities to stop criminals and their activities.”

Traditional methods of diversification reached their limits last year when the two most important asset classes – stocks and bonds – both recorded negative performance and Vorm said this uncertainty has continued into 2023 with the two asset classes seeing another sell off in the third quarter.

“This phenomenon marks a shift for investors,” he said. “You now have to find ways to deal with the new reality and, in our view, the key to this is a change in perspective, to think in terms of risk premiums instead of asset classes.”

Nordea’s multi-assets team looks to build portfolios that are structurally balanced between the risk contributions coming from aggressive risk premia, which can perform during economic recoveries or equity bull markets, and from defensive risk premia, namely those that should bring diversification during recessions and/or bear markets.

“These liquid alternative solutions enable investors to increase the level of diversification at the portfolio level and generate positive returns with controlled risk,” said Vorm.

“Given the current difficult market environment, true diversification is needed to cushion long-term market risks,” he added.

Looking ahead, Vorm said in the longer term current bond valuations are “finally attractive” which he noted makes expected returns for multi-asset portfolios “very” attractive over the longer term.

“On the equity side, we are also optimistic long term, but we have an even higher conviction on low-risk, high quality and attractively priced stocks that can deliver stable growth,” he said.

“These stocks trade, in some cases, at historically attractive relative valuations and can add significant convexity to client portfolios when implemented via long/short strategies.”

Following the approval from the Monetary Authority of Singapore, Nordea AM’s Singapore unit will be able to carry out regulated fund management activities including portfolio construction and allocation, research and advisory, business development, marketing and client servicing from Singapore, it said.

Nordea AM has had a presence in Singapore since 2018.

“Leveraging our global investment capabilities and the expertise and legacy of Nordea, the largest financial services group in the Nordic region, we look forward to bringing more compelling global investment opportunities to Asian investors through our attractive equities, fixed income and multi-assets solutions,” said Nils Bolmstrand, chief executive of Nordea AM.

“Singapore and Asia are important growth markets for NAM and we welcome the licence, which will allow us to deepen our footprint in the region and better serve our existing and future clients. With an investment team now on the ground in Singapore, NAM will be able to further capitalise on its global leadership position in sustainable investments and share our capabilities in delivering returns with responsibility to our institutional and wholesale clients in the region,” said Ana Dhoraisingam, head of Asia-Pacific distribution ex-Japan at Nordea AM.

For more insight on asset and wealth management in Asia, please click on www.fundselectorasia.com

The acquisition strengthens Nordea’s life and pension offering in Sweden and accelerates the bank’s strategic ambitions within savings.

Going forward, Advinans will be integrated into Nordea and operated under the Nordea brand.

Snorre Storset, head of asset and wealth management at Nordea, said: “We are very pleased to finalise the acquisition and welcome our new colleagues and customers to Nordea. Our corporate customers in Sweden will benefit from Advinans’s advanced digital platform, which will simplify their pension administration. Combining the digital platform with Nordea’s pension offering will create an even stronger customer experience.

“Our strategic plan is to grow in profitable business segments and build scale in the savings business. Our recent acquisitions of Nordea Pension in Denmark (previously Topdanmark Life) and Advinans showcase our ability to deliver on our strategy and provide a broad product and service range to customers in different stages of their lives, through advanced digital platforms and a broad branch network.”

The acquisition will have no material impact on Nordea’s financial performance.

Following the recent call of Apollo Asset Management for investors to introduce a higher weighting in absolute return funds going forward, Asbjørn Trolle Hansen, head of the multi assets team at Nordea Asset Management, argued investors should consider the opportunities in “alternative risk premia”.

“We believe investors can capitalise both cyclical and anti-cyclical return drivers from a broad and diversified set of 30 risk premia spread across strategy types and asset classes,” said Trolle Hansen.

For example, as an alternative to traditional government bonds in recent years, Trolle Hansen said Nordea Asset Management has utilised areas such as currency-related risk premia.

“Attractively valued currencies can provide pleasantly defensive characteristics, the simplest example being the Japanese yen versus the euro,” he said.

So, what has gone wrong for the 60/40 approach?

Trolle Hansen said with numerous asset classes performing positively in unison since 2009, most multi asset approaches – including the 60/40 – largely delivered on long-term investor objectives.

However, as turmoil swept through markets last year, sparked by aggressive central bank action to tame inflation, he argued that most traditional diversification methods were “found wanting”.

“In our view, traditional diversification has for some time not been able to protect investors to the extent it used to,” Trolle Hansen said. “The ‘correlation perfect storm’ we witnessed last year was a painful reminder of this.”

He added while risk assets have enjoyed a strong start to 2023, bouts of heightened turbulence are likely to become a feature of the market environment for the foreseeable future, as central banks continue to hike rates in an attempt to cool inflation and the damaging war in Ukraine continues.

Set the mood

Yet despite these challenges, Trolle Hansen said it is “not all doom and gloom” for investors.

“At the beginning of 2022, expectations for equity beta and duration risk premia were 4.5% and 0.3% per annum, respectively,” he said. However, because of the events of last year, this has now increased to 6.3% and 1.4% per annum.”

Trolle Hansen said Nordea is particularly optimistic on stable/low risk equities, which he argued have demonstrated an ability to perform through periods of heightened volatility – as well as periods of elevated inflation.

“As is commonly known, equities offer the highest return potential within a multi-asset strategy, but the asset class is also the greatest source of risk,” he said. “Therefore, it makes sense to identify companies displaying a greater degree of solidity in stock price, earnings, dividends, Ebitda and cash flow than the broader market.”

In Nordea’s view, stable, high quality and attractively valued companies – which historically offer more resilient earnings – are naturally in a far better position to navigate through this continually challenging economic backdrop.

“In addition, we look for companies exhibiting pricing power, which have the ability to pass on inflation price increases,” Trolle Hansen said. “This is a valuable characteristic in the current climate.

“Also, stable/low risk equities continue to offer a 1.4% earnings yield premium versus the broader market. This is an incredibly attractive building block for portfolios in the months and years to come.”