Stockholm, Market Timing, and Broadening the Total Portfolio Conversation

Earlier this week, I visited Stockholm to participate in the Nordic Pension Tour. Thank you to Mirjam Guldemond, Sophie Baker, and Pensions & Investments for organizing an excellent program.

It was one of those trips that reminds you why these conversations matter. Stockholm itself helped: the weather was beautiful, the city was full of that calm Scandinavian clarity, and even a short visit to the Nobel Prize Museum made it feel like a place where ideas still carry real weight.

Before the World Pension Summit, I visited AP3, Alecta, and FTN. Each institution provided a unique perspective on how long-term asset owners think about their investment.

At Alecta, I noted the central role of benchmarks. For liability-aware institutions, benchmarks are deeply embedded in the investment process. While this can be helpful, it raises an important question: when does a benchmark clarify the mandate, and when does it begin to replace it?

At FTN, together with AP7, we discussed defined contribution design and the challenge of selecting an appropriate target-date fund structure. Reflecting on my experience at Manulife, I believe DC systems must better capture individual risk tolerance. Age-based glidepaths are often insufficient. A comprehensive questionnaire and a multi-period investment perspective offer a more effective solution, aligning more closely with intertemporal portfolio choice than with static allocation.

One perspective that stood out to me during the visit to AP3 (Tredje AP-fonden) was their approach to market timing.

They view market timing not as speculation, but as a disciplined tool for tactically adjusting portfolio exposures in response to market conditions. This perspective is detailed in the paper co-authored by AP3’s CIO and Man Group, Market Timing: More than a Mirage, which defines market timing as tactical allocation shifts to capture anticipated market movements. The paper argues that effective timing should integrate macroeconomic and policy signals, valuations, fundamentals, market and liquidity dynamics, and sentiment indicators, rather than relying on a single factor.

Notably, the paper does not present timing as short-term opportunism. Instead, it links market timing to changing risk regimes, time-varying volatility, liquidity conditions, and the need to adapt as market structures evolve. Timing is treated as a disciplined form of risk management rather than speculative forecasting.

This challenged my assumptions, especially regarding how timing decisions can be systematically integrated into a total portfolio framework instead of being treated as ad hoc or opportunistic.

My own framework is not fundamentally different. I believe dynamic allocation is important, and that external conditions, risk regimes, liquidity, and market structure should inform positioning. However, I continue to place the greatest emphasis on the mandate as the starting point.

For me, a long-horizon total portfolio framework starts with the purpose of the capital: liabilities, required liquidity, currency of benefit payments, governance capacity, and the institution’s ability to act under stress. This is why I emphasize scenario analysis—not as an academic exercise, but as a practical tool to assess external forces that can structurally change the investment environment.

Inflation regimes, changes in real rates, fiscal pressures, geopolitical fragmentation, and currency realignments are not background noise. They reshape opportunity sets and redefine risk.

This is why I am concerned when investment processes focus too heavily on benchmarks that are only loosely connected to the actual mandate. While benchmarks can be useful, if they become the dominant reference point, institutions risk optimizing for something other than the fund’s true purpose.

This concern also shapes my view of liquidity. Liquidity is not universal; its definition depends on liabilities, cash-flow needs, and the reference asset for solvency. Even the concept of a “risk-free” rate requires careful consideration. If liabilities are in a currency other than U.S. dollars, U.S. Treasury yields may not serve as the relevant risk-free anchor.

In other words, liquidity, currency, and mandate are inseparable.

And so is governance.

A key theme this week was that investment decision quality depends not only on insight, but also on the governance structure that enables action. Even with a sound macro view and a sensible tactical response, without effective governance to support timely and disciplined implementation, any advantage remains theoretical.

This is why I found the conversations in Stockholm so valuable. They challenged and expanded my thinking. In particular, AP3’s perspective prompted me to consider how a systems-based total portfolio framework could better accommodate disciplined timing decisions while maintaining focus on mandate, liquidity, currency, and governance.

I look forward to exploring how this perspective can be integrated into my own systems-based approach to portfolio construction.

Thank you to Jonas Thulin for the insightful discussion, and to Simon Pilcher from USS for thoughtful conversation as well as practical assistance with the high chair.

See you all in The Hague in November.