AP6's Swartling on strategy, regulation and CSR

unquote": What do you think is AP6's future with private equity given the current discussions surrounding the Langensjö inquiry?

Karl Swartling: The team and expertise AP6 has collected represents a centre of excellence, and this is something worth fighting for. If the proposal is to break AP6 up and distribute the assets to different funds and structures, then that would be very unfortunate for the pension fund as a whole. This is because private equity investment will benefit from scale and we have proved, and I think will continue to prove, that the asset class has an interesting return potential and is something the pension system should continue to include.

unquote": How have you prepared for upcoming regulatory changes with Swedish state pension funds?

KS: The way we are handling this – and this is in tune with the instructions from our owner (the Swedish government) – is to keep going. And if something happens three years from now, we will see how the structures are adjusted and where the private equity asset class will end up. We are in the middle of the process that started in 2011 to redefine our strategy, rebalance our portfolio, move ahead and be very active on the market. And that's what we're doing.

unquote": You are currently redefining your strategy. Can you describe your future strategy and how and why it has evolved over the past few years?

KS: The Sixth AP Fund is a long-term investor in unlisted companies. Our focus going forward will be on more mature companies with growth potential, because in this segment the fund has historically enjoyed a high favourable return (+16.3% annual return since its inception in 1996). This applied irrespective of whether the investments were made directly in companies (+17.1%) or indirectly via other funds (+14.8%).

The fund's future-oriented strategy is to build further on such investments in the buyout segment. Direct investments in early stages (venture capital) have thus not been included in the fund's strategy since 2011.

unquote": To what extent does corporate social responsibility (CSR) factor in your investment strategy? How has that changed since the crisis?

KS: We aim at having CSR as an integral part of our investment activities and as such ensure that investment sustainability and CSR-issues are integrated into the due diligence process in a transparent manner. If AP6 comes to the conclusion that a potential investment fails to meet the requirements for sustainability efforts, the investment is rejected. Existing holdings in companies and funds are managed according to a model where the sustainability requirements are gradually increased. For all investments AP6 applies a running update of status through integrated reporting. Through this, improvement areas are captured and addressed.

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