Goldman Sachs won the contract in competition with 18 other international investment firms, all of which submitted bids in LD Pensions' EU tender. One of the reasons Goldman Sachs came out on top is that it can deliver a proven and academically underpinned strategy. That is to say, a portfolio structure that is transparent and comprehensible, based on well-defined factors.
“It is a major factor that the team at Goldman Sachs has been working on this strategy since 2009 and can demonstrate robust and stable factor exposure. And there is a strong organisational and technological set-up supporting the investment team,” says Charlotte Mark, Chief Financial Officer in LD Pensions.
Research and monitoring of the investment portfolio will be carried out from Goldman Sachs’ office in Boulder, Colorado, USA, whilst the offices in New York will execute the actual securities transactions.
We expect Goldman Sachs to be a highly professional partner, capable of handling the day-to-day execution of trades, compliance and reporting.
Goldman Sachs will play a key role for LD Pensions, as smart beta forms the foundation of LD Pensions’ equity strategy. Now that it has been clarified who will be responsible for smart beta, LD Pensions can therefore take the next step and prepare to select managers for other strategies (alpha strategies) designed to generate excess returns through stock selection and market timing.
A new partnership with great prospects
LD Pensions is set to become a client of a major firm that already manages USD 23 billion in smart beta strategies for other clients. Goldman Sachs will take over the management of the smart beta equity strategy as early as the second quarter of 2020.
To begin with, Goldman Sachs will start by investing approximately 1.5 billion Danish kroner of the frozen cost-of-living allowance funds from The Cost-of-Living Allowance Fund. However, LD Pensions expects to increase its investments in smart beta as the funds in LD Pensions’ second and newest fund, The Holiday Allowance Fund, are also due to be invested.
LD Pensions currently manages DKK 35 billion, which originates from the ‘high-cost period’ contributions made in the late 1970s. In 2020, LD Pensions began managing holiday allowance funds from the transitional year leading up to a new holiday legislation. This amounts to a total of DKK 100 billion, which will be partly invested in securities and partly held as receivables from employers.
