Facts: Investments for 140 billion
Christer Gardell’s Cevian Capital, as a so-called activist fund, has in twenty years built up a significant holding in a number of large listed European companies. The overall strategy is to create long-term value through active ownership.
Active ownership is practiced by buying large stakes (typically 12-14 percent of shares) in what are seen as undervalued listed companies and then pushing for efficiency measures.
The portfolio currently includes large holdings in:
Nordea (bank)
Ericsson (telecom equipment)
ABB (automation)
SKF (ball bearing)
Rexel (electrical equipment)
Pearson (Education)
Aviva (insurance)
Metso-Outotec (mining services)
Cevian Capital was founded by Lars Förberg and Christer Gardell in 2002 and today manages investments for approximately SEK 140 billion.
Source: Cevian Capital
The krone has lost around 15 percent against the dollar this year. The Swedish currency is also clearly weakened against other world currencies, such as the euro.
— But the fact that the krona is weak has nothing to do with Sweden being weak. It is the krona that is a small shit currency, says Christer Gardell.
He was opposed to introducing the euro in Sweden in the referendum in 2003, but in the almost 20 years that have passed since then, he has changed his mind. Among other things when he realized in 2017 that he could crack the small krone market when he was going to sell his holding in AB Volvo to Chinese Geely in 2017 for around 35 billion.
Poorer than we should with the crown
The krona is too small and the Swedish currency market therefore has too little liquidity, which means that it is seen as a risky investment, is Gardell’s conclusion.
— I have started to think again. We must join the euro, otherwise the Swedes will only get poorer and poorer, he says.
— Because with the crown, it doesn’t matter how well we manage this country. A small sloppy currency will always be undervalued. And with it we will be poorer than we should be, he adds.
“I think all the excess profits should go back to the customers. That money doesn’t really exist,” says financier Christer Gardell about the need for electricity price support in the wake of the energy crisis.
An argument for keeping the krona that is often heard is that it works well as an airbag for the export industry when the economy declines. The idea then is that a weaker krona makes Swedish goods and services cheaper and thereby hurts Swedish companies in the battle for market share with foreign competitors on the world market.
— That worked 20–30 years ago. They built things here and shipped them out into the world. But now we have factories all over the world. The old image of a doping crown no longer applies. Now it is a problem.
He notes, however, that the debate about the krona or the euro is not very lively in Sweden:
— It is a tricky political issue. And will any political party be able to bring this up to a referendum again?
— But if we Swedes are to become richer again, we have to do something about the currency, I think.
“The important thing is the electricity price support”
Gardell wants – beyond the currency debate – to give the new right-wing government more time to deliver promised tax cuts and reforms before joining the chorus of criticism about broken election promises.
— How long have they been there? A little more than a month or so? It is too early to make an evaluation, he says.
Although a large and rapid electricity price support for both companies and households is high on the wish list in the shadow of cut Russian gas supplies to Europe, which he thinks distorts the entire market.
— The important thing is the electricity price support. The electricity market is special, with marginal pricing and gas-generated electricity sending prices up to extreme levels, including due to the war in Ukraine. That means that everyone who produces electricity cheaply earns a lot of money, he says.
— I think that all excess profits should go back to the customers. That money doesn’t really exist, he adds.
“Everyone must hold back. You have to bite the bullet in 2023 and then you will hopefully receive compensation in the years after that,” is financier Christer Gardell’s call to both employees as well as top managers and board professionals in the face of inflation.
He also hopes that the Riksbank’s executive board calms down with interest rate increases when Stefan Ingves leaves the post as Riksbank Governor at the turn of the year.
— They don’t really need to raise the interest rate any more than they have done. The high inflation is already basically gone in Sweden. It will only take some time before it shows up in the statistics, he says.
A joker in the game, however, is the salary movement, according to Gardell. If there is too much compensation there, it may be more difficult and take longer to rein in inflation, he warns.
— This applies not only to employees, but to CEOs and boards as well – everyone must hold back. You have to bite the bullet in 2023 and then you hopefully get compensation in the years after that.
Gardell is critical of the fact that the Riksbank and large foreign central banks were so late to the ball and missed the dynamics when inflation took hold at an unusually high level last year.
“Clearly passed” in the final grade for Ingves
Now he is afraid that they will make the same mistake in the other direction and include too much in the austerity – despite the fact that the inflation problem has actually already been solved, with fewer bottlenecks and sharply falling prices for transport and input goods, for example.
— In this situation, the Riksbank must be very careful. I don’t think they should raise the interest rate any more. There is no point.
TT: What is your final assessment of Stefan Ingves after 17 years as governor of the Riksbank?
— Quite alright, given what he was faced with. It has many times been virgin ground he has stepped on.
— Then you can have views on details, something that should have been done earlier or not done at all. But if you look at the big picture, I give Ingves a “clear pass”.