Swedish pension fund AP3 has formed an innovative private equity investment platform alongside Wafra with $1bn (€970m) of initial capital, it said today.

The SEK491.5bn (€43.4bn) national pensions buffer fund and Wafra – a large investment firm owned by the Public Institution for Social Security (PIFSS) of Kuwait – said the platform, Covalent, would “build upon the success” of Capital Constellation. This is a cooperation between large asset owners launched by Wafra in 2018.

Henrik Nordlander, AP3’s head of private equity, said: “For AP3 this is a way to accomplish cost efficient, sustainable asset management as we strive to be a world class investor.

“Covalent is further evidence that strategic partnerships among asset owners can support our commitment to generating superior net returns for our beneficiaries,” he said.

In a statement AP3 and Wafra said: “The platform is focused on pursuing a new approach to private equity co-investing, harnessing the capabilities, networks and experience of a small number of large, forward-thinking, global asset owners.”

Covalent is to receive initial capital of $1.05bn (€969m) and focus on mid-market buyouts and growth equity investments mainly in North America and Europe, they said in today’s statement. It will actively support and partner with private market asset managers.

Current approaches to private equity co-investment were “ripe for positive transformation”, the two investment organisations said.

“By combining the resources and relationships of two of the world’s premier institutional investors, the founders of Covalent believe they can build a differentiated, fully aligned and agile source of capital,” the new partners said.

Covalent – like Capital Constellation – was intended to improve the alignment of all parts of the private markets value chain, and let “like-minded asset owners” achieve together what they could not alone, AP3 and Wafra said.

Read the digital edition of IPE’s latest magazine