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‘It’s a big failure for us.’ Sweden’s largest pension fund invested in both Silicon Valley Bank and Signature Bank

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Sweden’s largest pension fund, Alecta, is facing criticism for investments it made into 3 U.S. regional banks who face an uncertain future.  Following the collapse Silicon Valley Bank (SVB), who largely focused on tech startup companies, on Friday and the crypto-focused Signature Bank on Sunday, Alecta, who act as private pension manager for 2.6 million Swedes, are facing the prospect of nearly $1 billion in losses.

“Obviously with what’s happened last week we think that it’s a big failure for us as an investor,” CEO Magnus Billing told Bloomberg Tuesday. “And we need to learn something from that and take actions based upon the lessons learned.”

Alecta started purchasing shares in Signature Bank and Silicon Valley Bank’s parent company, SVB Financial, as well as the regional bank First Republic Bank in 2017, and they went onto ramp up their allocation over the following two years. At the end of last year, Alecta was the fourth-largest shareholder of SVB Financial, the sixth largest of Signature Bank, and the fifth-largest shareholder of First Republic Bank.

First Republic were able to salvage a 50% recovery as of publication on Tuesday following a massive sell-off on Monday. Alecta announced over the weekend that it arranged a $70 billion credit facility from JP Morgan and “additional borrowing capacity” from the Federal Reserve, however their shares are still down over 60% year-to-date. Alecta’s total stake in these three failed or struggling U.S. regional banks is 21 billion Swedish Krona ($2.1 billion).

Billing made an announcement regarding Alecta’s portfolio to reassure his clients in Sweden.  Billing said that Alecta’s investments into the 3 troubled banks makeup only 1% of their portfolio.

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“From a customer point of view, this does not have a material impact at all. It will not impact the pensions that we are committing to our customers,” he said, calling the Swedish pension system “very robust.”

Sweden’s Financial Supervisory Authority announced this week that it also believes the local financial system won’t be affected by U.S. regional banks’ issues, stating that it has “significant resilience,” The Financial Times reported Tuesday.

Billing was realistic on Alecta’s investment into the 3 banks and “doesn’t expect any value” from their $1.1 billion investment into SVB and Signature Bank, but in a Swedish radio interview Monday he argued First Republic was in a slightly stronger position than the other two.

“An important parameter here is the confidence in the bank. My judgment is that the confidence is much stronger in First Republic Bank compared to SVB and Signature Bank. I believe that First Republic will manage this,” he said, according to MarketWatch.

On Tuesday, Billing cautioned that First Republic Bank is still “very volatile,” and he hasn’t made any “major decisions.”

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Sweden’s financial regulator has also requested that Alecta’s executive team attend a meeting to discuss its investments in Silicon Valley Bank, Signature Bank, and First Republic Bank within the next few days.

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