Asset allocation challenges in times of war, inflation and rising interest rates

Earlier this fall, Tell Media Group, in cooperation with Aegon Asset Management, Blackrock and Schroders, organised a roundtable discussion in Copenhagen with Danish investors, focusing on asset allocation challenges and opportunities. Tell Media Group founder Niklas Tell and Nordic Fund Selection Journal editor Caroline Liinanki moderated the discussion.

The discussion started out with Caroline Liinanki asking the investors about their expectations going into 2022 and what the biggest surprises have been this year.

MIKKEL SVENSTRUP: “We run a risk parity strategy, so we have just as much interest rate risk as we have equity risk. That’s one of the reason we lost more on fixed income than equities during the first half of the year. Our expectation going into this year was that inflation would moderate and we kept our allocation to fixed income and that has been a position that has done very well over the last ten years. We were basically planning for business as usual. Everyone is, of course, talking about inflation and we’ve had an inflation factor that has been working well and did so in the first quarter of this year as well. But then there was the situation in Ukraine and central banks started to become more aggressive than expected. When we had inflation at around 4 per cent, politicians and central bankers could live with that. But when we had an additional 4 percentage points, everyone started running for the door. And that has been hurting the portfolio.”

IRENE HOLMSLYKKE: “I very much agree with what Mikkel just outlined. We were expecting inflation but we were not prepared for interest rates to rise as much as they did on the long end of the curve. We started to protect the portfolio but it has still not been enough.”

BERTIL FROM: “What has surprised me was the energy crisis. Going into 2022, we actually expected inflation to rise. We run our portfolio more on a total return basis, so for that reason we hedged all of our interest rate risk at the beginning of the year. With negative interest rates and a flat yield curve, we didn’t see that we were paid for taking interest rate risk. I’m in the lucky position right now that we have a positive return on the fixed income and credit portfolio and our real assets have also performed well. Where we have lost money has been in the equity portfolio.”


JOHANNA KYRKLUND: “Our strategy is very much focused on timing the rate cycle and we were positioned for the Fed raising rates, so in that sense the sell-off in equities and fixed income fitted into our investment frameworks. What was more surprising was the war in Ukraine and how stringent the zero-Covid policy has been in China. Overall, it’s unusual to see so many uncorrelated major events happening at the same time.”

OLAF VAN DEN HEUVEL: “We saw, of course, inflation last year and we expected it to come down slowly this year. That didn’t happen but clients have not moved a lot. What surprised me were the rallies we’ve seen over the last couple of weeks. That just seems wrong to me. Another thing worth highlighting is that sustainable investments have had a tough time this year but that’s obviously something we still are committed to. Looking back, in a global crisis such as this one, the only safety valve to let the pressure out is FX and we should have done more there." 

KARIM CHEDID: “At the start of the year, we expected the economy to start stalling after the post-Covid economic reopening and that has been in line with our expectations as activity data has slowed. What shocked me was the persistence of the supply chain disruptions and that, of course, ties into what Johanna said about the uncorrelated events that we’ve seen. In addition to the zero-Covid policy in China and the war in Ukraine, we’ve also had climate events that have played a role in protracting the supply chain disruptions and add to inflationary pressures.”


The roundtable discussion was published issue 05 of Nordic Fund Selection Journal. A PDF of the complete story can be found here.



  • IRENE HOLMSLYKKE, CEO, PFA Asset Management
  • BERTIL FROM, CFO, Lundbeckfonden
  • OLAF VAN DEN HEUVEL, Head multi asset & solutions, CIO, Aegon Asset Management
  • KARIM CHEDID, Head of investment strategy for iShares EMEA, Blackrock
  • JOHANNA KYRKLUND, Group CIO, Schroders