Pimco’s Patrick Dunnewolt: “Think global, act local”
Pimco’s head of Nordic region, Patrick Dunnewolt, talks about how the pandemic and Brexit have influenced the firm’s Nordic business and about the firm's grown real estate offering.
With vaccine programmes rolled out and most European countries looking to ease the tight restrictions around travel come summer, many asset managers are also looking to get back to travelling. Despite some Nordic countries having looser restrictions than some of their European counterparts, most investors in countries such as Sweden have, however, opted out from any face-to-face meetings deemed non-essential. For managers, this has meant almost a yearlong halt in any in-person meetings with clients. So, how has this long separation from clients worked out for asset management companies, especially ones that do not have a local presence in the region?
The USD 2.2 trillion (EUR 1.8 trillion) fixed income manager Pimco’s head of Nordic region, Patrick Dunnewolt, says that despite not being able to meet clients face to face, or having a local office, the active fixed income manager has still managed to increase its asset base in the Nordic region.
“We have this saying ‘Think global, act local’. Our team consists of people from different Nordic countries, so we have the insight without currently being able to have actual physical presence,” he notes, adding: “You can have all the plans in the world but unexpected events, such as the covid-19 pandemic, can shuffle the board in a blink of an eye and you need to be adaptable.”
Patrick Dunnewolt says that despite the distance, Pimco currently has no plans to open an office in the Nordics. “We are very happy with our current setup,” he notes.
For the well-spoken Dutchman, who manages a team of six account managers and one associate at Pimco’s London office, the pandemic has brought its own challenges. Residing in the Netherlands, the travel restrictions have prevented Patrick Dunnewolt from meeting his team in person.
“I miss being able to meet my team. I haven’t seen them face to face in 11 months,” he says, noting that the pandemic has been especially challenging from managerial perspective. “Managing people is not just talking about business, it also includes those informal conversations in-person. I really miss the talks with my team and catching up with them over a coffee or lunch,” he notes.
In addition to not being able to meet his team, Patrick Dunnewolt says the pandemic put a halt on manager selection. “However, with time this has changed and we now see investors have adapted their manager selection processes,” he says.
This has been a development in a positive direction again, notes Patrick Dunnewolt, especially as Nordic investors tend to take their time to select managers. “Nordics is a region where mutual trust is very important and managers really need to invest time to get to know the investors. Managers unfamiliar with the region might make the mistake of treating the different Nordic countries as one, although they differ quite a lot in terms of appetite for different asset classes,” he says. He also notes that once a manager manages to build that trust and respect, Nordic clients often remain very loyal. “We have some clients in Finland, for instance, that have been with us for over 30 years.”
Big changes have also taken place at the California-headquartered asset management firm. It recently incorporated its parent company Allianz’s real estate portfolio to its offering. The portfolio, which holds more than EUR 50 billion in private real estate equity and EUR 20 billion in privately originated real estate debt, was united with Pimco’s real estate platform, which is focused on opportunistic and credit investments, to create EUR 100 billion plus real estate manager.
According to Dan Ivascyn, Pimco’s group chief investment officer, the economic shock caused by the global pandemic “has created deep fissures in the commercial real estate market which have yet to be fully reflected in pricing and this creates plenty of investment opportunities”. He also said in a statement that in addition, there is a need for flexible capital in the real estate debt markets that is now more accessible through private lenders.
Patrick Dunnewolt says that going forward, the team will also be discussing new opportunities on the real estate front with Pimco’s Nordic clients. “I want to send a positive message to our clients. There is light at the end of the tunnel. I believe that year 2021 will be a year of transition. I am looking forward to having those conversations with our clients about what their plans are for the coming year and what we can do to help them optimise their portfolios,” he says.
In addition to portfolio optimisation, Patrick Dunnewolt is keen on discussing the current global affairs and how they will impact investors’ views about the markets in the future. “It’s important not to operate in a silo,” he says, noting that Pimco’s Global Advisory Board, which was established in 2015, is a valuable contributor to its house view. The board’s five members include the UN Special Envoy on Climate Action and Finance and the former governor of the Bank of England and the Bank of Canada, Mark Carney; the former UK Prime Minister and chancellor of the Exchequer, Gordon Brown; former White House Chief of Staff Joshua Bolten; former group chief investment officer of the Government of Singapore Investment Corporation (GIC), Ng Kok Song; and former Federal Reserve Chair, Ben Bernanke.
In regards of other topics that might interest the Nordic investors going forward, Patrick Dunnewolt notes that he believes the appetite for ESG on the fixed income side will keep on growing. “What we see from the Nordics is an increased emphasis on ESG integration and active engagement on the fixed income side. And there is definitely an increasing need for resources to do this,” he says.
In terms of where to look in the fixed income front this year Patrick Dunnewolt says that especially select housing and EM exposures, along with private credit and multi-strategy credit, are asset classes that have the potential to enhance portfolio performance over the coming months.
For investors looking for protection against inflation, Patrick Dunnewolt recommends buying U.S. Treasury Inflation-Protected Securities (TIPS), which he says offer a reasonably priced hedge against higher inflation over the long term.
