Historically, the Nordic region has held a significant presence in the private equity asset class, and while Nordic-based LPs may be one of the smaller groups, they should not be overlooked by any means.
Preqin’s Investor Intelligence online service currently tracks 193 private equity investors based in the Nordic region, which together manage over $4.3tn in assets. Almost a third of these investors (32%) are actively looking to make new private equity commitments over the next 12 months, 82% of which plan to invest immediately. By country, Norway-based investors are the most dominant, accounting for 26% of all Nordic-based investors. This is closely followed by Sweden-based investors (23%), and then Finland-based investors (22%), Denmark-based investors (21%) and Iceland-based investors (8%).
The prevailing type of Nordic-based private equity investors are pension funds, accounting for 34% of all investors, with public pension funds accounting for 20% of all Nordic LPs and private sector pension funds following closely at 14%. Other important investor types in the region include insurance companies (12%), investment companies (9%) and foundations, which account for 7% of all Nordic-based investors.
In terms of investment preferences, it is unsurprising that 82% of Nordic-based LPs have a preference for, or have previously invested in, Europe-focused funds. North America is the next most common region for investment opportunities for Nordic-based investors (35%), followed by Asia, and other economies outside of North America and Europe (24%) and emerging markets (21%). In terms of fund preferences, Nordic-based investors have a strong preference for buyout and venture capital funds (72% and 65% of LPs respectively). An example of a recent venture capital fund commitment from a Nordic-based LP is that of Argentum Fund Investments into Northzone VII, an early stage start-up fund which held a first close in Q4 2013. Growth vehicles are also a strong preference for Nordic-based LPs (52%), with fund of funds following closely at 47%.
With a significant number of Nordic-based LPs expressing an active interest in private equity and substantial allocations for investment into the asset class, these investors are likely to remain an important source of capital for private equity in 2014.