Alecta is working to make more large-sized investments in unlisted equity in Europe, but says progress towards achieving a higher allocation depends on finding the right opportunities.
Marcus Lüttgen, portfolio manager at Alecta, said in an article in Swedish business daily DI: “So far we have invested around SEK3.5bn (€343m) in unlisted shares. The money has more than doubled in a relatively short period.
“There are a lot of interesting, big companies away from the stock exchange and we have appetite for more,” he said.
Along with portfolio manager Leif Törnvall, Lüttgen manages Alecta’s mid-cap portfolio, which includes listed and unlisted companies.
According to Alecta’s internal asset allocation rules, the SEK1trn pensions giant can invest up to 10% of its total equities portfolio – which was worth SEK420bn at the end of last year – in unlisted assets.
“We want the unlisted investments to have a relevant size for the portfolio,” Lüttgen said.
“This means that investments in new companies of less than SEK500m will become unusual,” he said.
A spokesman for Alecta told IPE the firm was not aiming for the full 10% allocation to unlisted equities in the near future, although the proportion would certainly increase a bit from today’s levels.
Since 2018, Alecta has made unlisted equity investments in pest control firm Anticimex, vet care provider IVC Evidensia, pharmacy business Apotea and most recently, music rights tech company Epidemic Sound.
The four investments in unlisted companies sit alongside 37 holdings in listed firms within Alecta’s mid-cap portfolio, which has a current value of SEK55bn.
Since 2012, Alecta says the portfolio has made average annual returns of around 19%, according to internal yield calculations.
“We look for companies which are world leaders in what they do, regardless of whether they are listed or unlisted,” Lüttgen told DI.
“There shouldn’t be a best-before date on their business model, but rather they should be able to manage in crisis times too,” he said.
Törnvall said the companies in Alecta’s sights should create very strong customer value by being unique and solving a significant problem, as well as having a scaleable platform so there is room for growth.
The Alecta spokesman said the mid-cap portfolio team mostly invests in Europe, although so far the geographical focus of its unlisted investments had been narrower, with three of the holdings being Swedish and one UK/Swedish.
However, the portfolio’s team is looking at a broad list of mainly European companies, he said.
Hans Sterte, head of asset management at Alecta, said in the DI article: “Now that liquidity is so high in the world, in relative terms, we get paid better for less liquid investments such as unlisted.
“We are looking for that premium for our portfolio. It is a strategy we have across all asset classes, not just stocks,” he said.