Markets

Asset Management

Asset Management and Arion Bank’s subsidiaries are leading players on the Icelandic asset management market, with assets under management of ISK 1,131 billion.

Diverse services to cater to different needs

Asset Management specializes in providing a full spectrum of investment opportunities and services for clients with varying investment objectives. We offer a broad range of products and services tailored to our clients’ needs. The division’s employees have decades of experience and expertise in the financial markets. We strive to offer personal services, laying the foundation for strong, long-term and financially rewarding relationships with our clients.

Sustainability and responsible investments

Arion Bank Asset Management plays an important social role by protecting and investing assets for private clients, institutions and companies. Our business is built on trust and responsibility towards our clients, stakeholders and society as a whole. As a leading player on the domestic financial market, Asset Management takes its responsibilities seriously and we are committed to developing our knowledge of sustainability and responsible investments.

In 2018, Institutional Asset Management introduced rules of procedure on responsible investment which incorporate the three basic criteria of sustainability: environmental, social and governance. These criteria are used along with financial criteria to evaluate investments. If clients operate in accordance with a defined shareholder policy, information on active ownership and voting rights is carefully recorded.

In recent years Institutional Asset Management has carried out an analysis of non-financial information relating to Icelandic companies listed on the main market of Nasdaq Iceland. Asset Management analysts had identified a lack of coordinated non-financial information on the Icelandic market and had noted that companies were not using the official benchmarks designed to help them. The analysis, carried out according to the Nasdaq ESG reporting guide, also created a valuable opportunity for Asset Management to discuss non-financial reporting and progress on sustainability with representatives of the listed companies. Asset Management believes that both the quantity and quality of non-financial information have significantly improved between years, making the entire analysis more accessible and more thorough.

In 2020 Asset Management drew up guidelines for employees on responsible investments in all asset classes. Simultaneously a team was established which is responsible for reporting and analysis.

Strong year for the pension funds

Asset Management specializes in managing assets of institutional investors and pension fund administration. Frjálsi Pension Fund, Iceland’s largest independent pension fund, has long enjoyed a thriving partnership with Arion Bank and its predecessors. Arion Bank’s supplementary pension scheme, Lífeyrisauki, is also managed and administered by Asset Management. Lífeyrisauki is the largest defined contribution fund in Iceland which exclusively receives supplementary pension contributions, and at year-end its assets under management amounted to approximately ISK 112 billion. Approximately 20,000 fund members choose to pay supplementary pensions in Lífeyrisauki to provide for retirement or to use their savings to repay their mortgage. Lífeyrisauki offers a wide range of investment options. Lífeyrisauki enjoyed an excellent nominal return in 2020 and the best performing investment strategy was Lífeyrisauki 1, and the nominal return on all the different strategies ranged from 4.2% to 19.8%.

Frjálsi Pension Fund has enjoyed great success in recent years and has won 13 international awards from the respected publication Investment & Pensions Europe (IPE), the most by any Icelandic pension fund.

The fund is now more than 40 years old and was established in 1978, forming the basis for the first private pension fund in Iceland for all employees free to choose which pension fund they wished to belong to. The fund therefore provided a counterbalance to the mandatory labour market coinsurance funds established several years previously. Over the decades, the fund has been administered by six financial institutions, the last 12 years under the management of Arion Bank. The latest news on Frjálsi Pension Fund can be seen on its website and on its Facebook page.

We continued to prioritize digital services and self-service channels for pension products. Arion Bank’s digital distribution channels, particularly the app and online platforms, have vastly improved the availability of information and service relating to pensions. Customers made full use of the opportunity and there was a surge in new supplementary savings schemes with Lífeyrisauki and Frjálsi Pension Fund via the app.

The Arion app allows customers to get a clear overview of their pensions and even enables them to set up supplementary pension saving schemes. By digitalizing pension products, we are making pensions more relatable to our customers, improving the quality of information and enhancing their overall experience, while helping to further implement the Bank’s digital strategy

Private Banking

Private Banking at Arion Bank offers a broad range of personalized financial services for high net worth retail and corporate clients, funds and institutions.

Each client has their own account manager who manages and invests the asset portfolio. Account managers closely monitor activity on the financial markets and make changes in accordance with an investment strategy designed to meet the client’s financial needs.

Clients of Private Banking are in close contact with their account managers by phone, e-mail and regular meetings. Detailed account statements are issued on a quarterly basis and clients can also view their investments via their online bank account. Private Banking clients receive the Bank’s premium terms at any given time.

Private Banking performed well in 2020. The securities markets in Iceland and internationally were highly volatile and our clients enjoyed solid investment returns. The circumstances brought about by the COVID-19 pandemic meant that we had to adapt the way we communicated with our clients, whether it was by phone, video meetings or normal face-to-face meetings. We also welcomed many new clients to Private Banking during the year, illustrating that there is strong interest in our services among individuals and corporates.

Clients of Private Banking and general investment services continued to make full use of the digital solutions offered by the Bank and the innovative products launched over the year. Retail and corporate clients can now open custody accounts simply and securely by signing agreements and other documents electronically. This makes it easier for our clients to sign documents anywhere and anytime if they have the necessary electronic ID. Digital solutions clearly proved their worth during this unique year.

Capital Markets

Capital Markets brokers securities for the Bank’s international and Icelandic clients. Arion Bank has been a key player on the main market of Nasdaq Iceland for many years and had the highest market share in equities in 2020 for the fifth successive year. On the fixed income market Arion Bank had the third highest market share.

Capital Markets has cultivated strong business relationships and our team of professionals can advise on and broker transactions with listed securities on all the world's major securities markets.

It’s safe to say that 2020 was no ordinary year on the securities markets. The economic mayhem triggered by the spread of COVID-19 necessitated an unprecedented response from the government and the Central Bank of Iceland. Huge price volatility created challenging conditions, particularly in late February and March on the equities market and during the autumn on the bond market. Almost 60% separated the lowest and highest prices on the OMXI10 share index over the year, and there was a difference of 1.40 percentage points in the highest and lowest closing yields of the longest nominal government bills.

Nevertheless, it was by and large a strong year for Capital Markets and our clients. The markets grew, revenue increased, and earnings improved. We continued to bring on board new clients and there was a discernible increase in public interest as the year went on. Declining short-term interest rates and the substantial increase in money supply have led to a new reality on the domestic and international capital markets.

Arion Bank has made efforts on several fronts to develop and strengthen the Icelandic securities market, such as by getting the public more interested and involved in the market. In November and December, the Bank canceled fees on share transactions in online banking on amounts under ISK 1 million and the response exceeded all our expectations. The Bank will continue to develop digital solutions to leverage on the success we have had in this area