Torbjörn Hamnmark is a seasoned expert in the investment management industry, with extensive experience in both Sweden and internationally. As Head of Strategic Asset Allocation at AP3, Torbjörn managed billions in global investments, navigating the complexities of diverse portfolios that span equities, bonds, and alternative assets. In this interview, he shares his approach to asset allocation, risk management, and how sustainability is fully integrated into his investment strategies. Torbjörn also highlights the future role of AI in investment decisions and reflects on the global trends that will shape the industry in the coming decades.

You have had an impressive career in the investment management industry, particularly at an international level. Could you share a bit about your background?

“I have always worked in finance and started within trading, risk management, and options trading. I have had the chance to work both in Sweden, with companies like Carnegie, and internationally, including a period in London at Citibank, where I worked as a market maker in options and derivatives during the 90s. Later, when I returned to Sweden, I joined Skandia Asset Management where I took on responsibility for the fixed-income team including product development, leadership, and customer relations. In 2010, I went to AP3 as an investment strategist, and for the past ten years I have led that function.”

How would you describe your approach to asset allocation?

“I have always been interested in what drives markets and economies. At AP3, which is part of the Swedish state pension system, I covered everything from global equity and bond markets to alternative or unlisted assets like real estate, infrastructure, private equity, and timberland. My approach is to focus on long-term drivers and assess what’s most important for the next steps, keeping current global economic trends in mind, but with a forward-looking mindset.”

How do you manage risk, particularly in such diverse portfolios?

“Risk management is essential, and I use scenario analyses and stress tests to evaluate risks like inflation and currency volatility. These tools help assess what could happen under different market conditions. I believe AI has a lot of potential to assist in this area, particularly in summarizing and analysing large datasets, making risk management more efficient.”

Speaking of currency risk, how do you handle that, especially in global portfolios?

“Currency risk is one of the most intriguing parts of portfolio management. It’s critical to constantly monitor exposure to sensitive currencies like SEK, especially when managing global portfolios. It’s a unique extra layer of risk that we must handle daily.”

How do you stay updated on market trends and economic shifts to adapt your strategies?

“I rely on a mix of news, research, and conversations with my network of industry colleagues and specialists. Staying informed is key. Interestingly, geopolitical events, even wars or the pandemic, have affected the markets less than you might expect. For instance, the COVID pandemic triggered massive business stimulus, which helped maintain market activity. However, I’m more concerned about demographic changes, especially in Europe, where declining birth rates are pressuring the labour market.”

Sustainability has become an integral part of investment strategies. How do you incorporate ESG factors in your asset allocation process?

“In Europe, ESG is integrated into how we think, it’s a natural part of our analysis. But it’s not without its challenges, especially with complex issues like energy transitions and biodiversity. As financial professionals, we need to collaborate with specialists in these areas. Sometimes the complexity of ESG can feel overwhelming, but it’s essential to stay engaged with it, particularly when considering the geopolitical risks that come with investing in certain regions.”

What metrics do you use to measure the success of your investment strategies?

“Traditionally, we construct a benchmark using various indices for global markets to evaluate returns. However, measuring non-financial success, like contributing to the energy transition, is a different challenge. The EU has placed high demands on reporting, and I believe AI will play a big role in helping us meet those requirements.”

Looking ahead, what trends or innovations do you think will shape asset allocation in the next 5 to 10 years?

“The next 20 years will be radically different. Geopolitical developments and the energy transition will shape the investment landscape. We also need to understand demographic changes, there are over 8 billion people on the planet, but we will not see much more overall population growth. People are ageing, and birth rates are dramatically, especially in developed countries. This will challenge pension systems, the tax base and labour markets. The technological developments will continue to be very impactful which hopefully also will help us deal with all the challenges we now face.”

Outside of work, what do you enjoy doing in your personal time?

“I love cooking and experimenting with new recipes, it’s a great way to unwind and do something creative. I also have a country house south of Stockholm, where me and my family can relax and disconnect from work. It’s important to take a step back sometimes and not get lost in the details.”

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