SWEDEN - The convertible bond product the Swedish buffer fund Sjätte AP-fonden, AP6, launched in January this year has been a success. Ideas for more product launches are being considered.

"The reception in the market has been incredibly good, everyone seems to know about the product," said Stefan Holmgren of the Treasury at AP6.

He told IPE: "We have so far been contacted by more than 200 companies. We have made 25 analyses and three deals, and several are in pipeline. We are aiming at closing five deals during 2006 at a total value of SEK 150m (€16.3m)."
The fund launched the convertible bond product earlier this year for small and medium enterprises. The instrument, which allows bonds to be converted to equities in the company at some future point, was aimed at helping generational changes within companies. The government has appointed AP6 the role of supporting Swedish businesses.

The Treasury was given new responsibilities in 2005. Its activities are to focus on yet un-invested capital of the fund.

"They will cover the management of capital in interest-bearing assets, hedge funds and the acquisition of convertible bonds in connection with the financing of generation change in family-owned businesses," the 2005 annual report of the fund stated.

Setting up the Treasury to manage non-invested capital was seen as "an increased activity within the fixed income portfolio, and at the same time as being in line with the overall mission of the fund to invest Swedish Pension capital into unlisted companies", Holmgren explains.

Although the Treasury has come up with new ideas for product launches, Holmgren says that for the moment they will focus to the convertible bonds product and "not compete with traditional private equity or the banks traditional acquisition finance for small and medium sized companies.