Sweden's AP7 aims to grow private equity exposure by SEK10bn

AP7 is set to hire as many as four private equity managers amid plans to commit a further SEK10bn (€1bn) to the asset class by the end of 2017.

The Swedish fund, which acts as the government-backed default for savers in the premium pension system, says the SEK10bn will be deployed to chosen managers over the course of 2016-17, after which the exposure to private equity will increase in line with the fund’s growth.

Richard Tyszkiewicz, senior director at bfinance, told IPE that AP7 was interested in fund-of-fund managers that would operate within a segregated account dedicated to the Swedish scheme.

He added that AP7 was willing to consider primary and secondary private equity investments, but also co-investments, allowing for a variety of approaches across both regionally targeted and global strategies.

However, managers should have at least 70% of assets in primary fund investments.

AP7 hopes to shortlist 12 managers in the procurement process being run by consultancy bfinance, which earlier this year led on an equity tender worth 90% of fund assets.

It added that the managers would be appointed for an initial term of three years, with an option for two renewals of two years each.

Interested managers have until 20 January to apply and can obtain additional information from bfinance.

AP7 has been active in private equity since 2002, when it initially invested in two funds managed by HarbourVest.

The fund’s 3% allocation to private equity sits within the SEK262.5bn equity fund, which, combined with the SEK18.3bn fixed income fund, forms the basis for the Såfa default option.

Funds managed by Hamilton Lane and LGT Capital Partners account for the remainder of its private equity exposure.

Richard Gröttheim, AP7’s CIO, told IPE earlier this year that the fund wished to improve the private equity sector’s “openness and transparency”, noting how much private equity lagged behind listed stocks.

He also said the fund would in future be focusing on cleantech investments, a sector he said would eventually account for one-third of AP7’s private equity holdings, up from one-fifth at present.

“So far, it is a nascent industry, so performance has yet to show consistency,” Gröttheim told the May issue of IPE.

“We are convinced this is a future industry that will grow and eventually become one of the drivers of the equity market as others adopt their technologies.”

For more on AP7’s investment strategy, read IPE’s recent interview with CIO Richard Gröttheim

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