Estonia’s LHV Asset Management (LHV) has, on behalf of its pension funds, invested in the €126m BaltCap Private Equity Fund III (BPEF III), along with SEB pension funds in Estonia, Latvia and Lithuania.

The new fund, whose first close raised more than the initial target amount, will continue the “buy-and-build” strategy of its predecessor funds, BPEF I and BPEF II, making equity investments in mature innovative enterprises to build them into “business champions”.  

The fund will aim to make eight to 10 platform investments in the Baltic and Nordic countries, the enterprise values of these companies typically being €10m to €50m and the fund’s equity investment in them between €10m and €20m.

LHV’s pension funds are, in aggregate, one of the largest investors in the fund. Others include the Nordic Environment Finance Corporation, the European Investment Fund investing partially through Baltic Innovation Fund 2, the European Bank for Reconstruction and Development, eQ Asset Management, and family offices.

Martin Kõdar, managing partner, BaltCap, said that in addition to the Baltics, BaltCap’s core region, the fund will also focus on Finnish and Swedish companies with a Baltic nexus.

Allan Gaidunko,
 portfolio manager, LHV Asset Management, told IPE: “We decided to invest in BPEF III mainly as part of our mission to continue supporting the local economy and the growth of local companies.” 

He said that in their previous funds, BaltCap’s team had showed their ability to successfully build up and exit local companies.

Total pension fund assets managed by LHV amount to around €1.3bn, with about 8% invested in private equity funds.

Endriko Võrklaev, fund manager, SEB Investment Management, said: “Today more and more growth stories can be found outside listed markets.”

“We consider local private companies a good match to the local pension funds with a long investment horizon,” he added. “Our growing exposure to local economies also helps us to remain competitive against local inflation.”