SWEDEN - Sweden’s financial supervisory authority, Finasinspektionen (FI), has said it is worried about the rising levels of debt in private equity and venture capital companies and has called for greater transparency in their activities.
The FI says it is particularly worried because of Swedish pension funds’ exposure to private equity. Sweden’s AP Funds, the buffer funds of the second pillar pension system, have invested SEK 28bn (Euro 3bn) in Swedish private equity and venture capital funds.
Erik Saers, deputy director-general at FI, responsible for monitoring financial markets, told IPE he was sending a ‘wake up’ call to the private equity industry.
“Since there is a the possibility for a lot of pension money to go into those kind of placements, we consider it important to have a transparency in how private equity companies run their business and what levels of debt they have.
“Private equity companies have a high degree of freedom and do not have regulation, and the transparency is not as high as we would like. We are not looking for the same transparency as ordinary funds, but a bit more than at present so the pension fund managers will be able to evaluate what is being done in those businesses.”
Saers said there were no plans currently to tighten regulation of private equity companies. “By mentioning it and discussing it publicly we hope that the private equity business will try to be more transparent as a part of self-regulation. I believe they have a lot to gain from that.”
But if the situation did not improve, he said, the FI would ask the Ministry of Finance for powers to require greater transparency.
Tom Berggren, director general of the Swedish Private Equity and Venture Capital association, said the FI’s concern was unjustified.
“We haven’t seen any problems with too high debt so we believe it under control. If the debt equity ratio is too high our members are well aware of that and they monitor it closely. And of course the investors, the pension funds, are very active in this and receive full information. So we don’t see any real reason for worries at the moment.”