Sweden’s AP6 – the private-equity specialist among Sweden’s state pension buffer funds – said investment deals done last year when capital markets were particularly liquid have reduced its vulnerability to the economic cycle and boosted exposure to long-term growth trends.
In its 2019 annual report, AP6 said it made SEK8.1bn (€767m) of new investments in its fund and co-investment portfolio during the year, sold SEK5.6bn of investments and made SEK6bn of new fund commitments.
Through these deals, the Gothenburg-based fund said the diversification and widening of the portfolio had been further strengthened, and it had also made the portfolio less cyclically sensitive.
The transactions had created more exposure to companies and industries that generated value from underlying long-term trends, it said.
Katarina Staaf, chief executive officer of the buffer fund, said in the annual report: “We can sum up the year with a good return of just over SEK2.8bn, corresponding to 8.2%, with a high level of value creation within the portfolio together with a number of sales contributing to the result.”
This percentage return after costs is down from 9.6% in 2018 and 12.3% in 2017.
However, the fund said its mission is to focus entirely on investments in unlisted assets which are illiquid, and the return should be measured in the long term. The five-year annualised return for 2014-2019 was 9.8%, AP6 reported.
The buffer fund’s capital grew to SEK37.5bn at the end of 2019 from SEK34.7bn a year before.
Staaf, who only took up the lead role at the fund last September, said liquidity in the capital markets had continued to be very good in 2019, which had created a high level of activity in the private equity market.
AP6’s restructuring of its strategy, which has been going on since 2013, has been characterised by a period in which its has made a large number of new investments, and has gradually created a portfolio of good quality co-investment fund holdings, Staaf said.
“With this year’s investments and sales combined with those implemented in recent years, we are gradually building a robust portfolio with good long-term potential,” she said.
By far the smallest of the five buffer funds backing the Swedish income pension – the main part of the general or state pension – AP6 is the last of the funds to report its annual results this year.