Skandia, the $46 billion (SEK 386 Billion) Swedish life pension provider is launching its first private equity buyout fund, Modern Investor can reveal.
The launch is in line with Skandia's strategy to grow its private equity holdings, and comes on the back of strong returns from the company's private equity buyout scheme which has delivered 5-year annual returns of 11.6%, confirmed Hans Sterte, Skandia's chief investment officer.
The Skandia Life portfolio currently has SEK 35.974 billion in private equity holdings, equivalent to 9.3% of total assets, producing 5-year annual returns of 12.1%. Skandia attributes the difference between total private equity returns and private equity buyout returns to the outperformance of its private equity venture capital holdings in the last two years.
Under Sterte’s stewardship private equity holdings have increased year-on-year since 2005, when it stood at 1.2%. Sterte said, ‘My one-to-two year goal is to have 10% in private equity, 10% in real estate and 4% infrastructure, with roughly 40% in fixed income and 60% in riskier assets.
Sterte said the company will begin to market the SICAV-SIF Luxembourg-based fund primarily at institutional investors this autumn ahead of its scheduled launch date in January 2016. He added, ‘It will mirror the investment strategy that we currently have in the Skandia Life portfolio. When it comes to returns, our required rate of return for this asset class is 300 basis points above the public equity market.’
‘Skandia's total portfolio annual returns have averaged 8% over the past 5 years. In the current low-yield environment where investors are seeing negative returns, my investment approach is to take concentrated risks to deliver strong alpha. '
Within the life pension portfolio, Sterte’s private equity investments are mainly focused in the US and Europe in a roughly equal split. Skandia launched its two other pooled funds, a SEK 3.1 billion bank loans fund and a SEK 1.1 billion real estate fund, this spring. It is also seriously considering launching new funds in venture capital and infrastructure in the future, Sterte said.
Skandia's investment management team, which oversees the Nordic company's life pension porfolio, mutual funds and structured products, stands at 85 members today, compared to 40 three years ago.