None of the Stockholm-based pension funds and banks we visited in December expected to increase their continental stock exposure over the following 12 months – in part reflecting fears that krona appreciation against the euro could negatively affect the outlook for local exporters. Some 70% of interviewees planned to maintain their allocations, while the remainder forecast lower weightings.
Yet there are signs demand for the asset class is returning. According to voting data from the Expert Investor Nordic conference this month, half of Swedish fund selectors now expect to increase their broad European stock exposure – the most positive response from this group on any major equity region.
Appetite for continental small caps is similarly strong, with more than 40% of delegates planning higher weightings, and less than one-fifth predicting allocation cuts.
The return to European risk assets appears linked to confidence that the euro will survive – in the short- to medium-term at least. However, Swedish fund selectors also support the idea that the single currency bloc should be restructured, with almost half favouring a new union of fiscally-strong member states.