AP6's strategy shift makes sense

The announced shift in strategy for the Sixth Swedish Pension Fund (AP6) has been extensively reported in the press, with industry representatives voicing concerns over the consequences for Swedish innovation and the venture industry. Although the shift in strategy, a move away from early-stage and growth business to focus on more mature companies, is understood not to affect AP6's existing venture fund commitments, there is fear it could spell a sharp drop in the pension fund's ongoing support for start-ups, which have relied heavily on it for support in the past.

Industrifonden CEO Claes de Nergaard even expressed concerns about the wider impact of the decision, drawing parallels to 3i's wind-up of its venture commitments. Who is now going to fund the next Skype or Spotify? Others worry AP6's decision will not only take away much needed capital from an already deprived segment of the market, but also brand venture as a high risk, low return asset class.

Are they right to be concerned? AP6 has recorded a near 20% IRR on its overall fund commitments. But its early-stage direct investments are lower, amounting to annual losses of more than 8%. Much of this is due its commitments during the IT bubble. To argue against a strategy shift in such circumstances would be nothing short of irrational.

Yes, as the SVCA repeatedly points out, venture can give good returns, but the success stories are few and far between, and most often from top-tier funds. AP6's main problem thus may be the breadth of its scope, acting as both an LP and a GP, covering turnaround, restructurings, venture and mature buyouts.

Despite the negative signals this sends, and the counter-intuitiveness of such a shift in a recession - especially coming from a government-backed fund - a sharper focus might be just what the industry needs.

Yours sincerely,

Rikke Lilla Eckhoff

Editor, Nordic unquote"

Tel: +44 20 7484 9824

rikke.lilla-eckhoff@incisivemedia.com.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Nordics