Nordics Biggest Buyout Firm Adds Wealth Funds Call

By mdkg1116

Oct 24, 2016 09:26 AM EDT

Looking for ways to make money in an era of ultra-low rates, EQT partners AB in trying to keep up with the demand from its investor base through adding staff and internationally expanding as the sovereign wealth and pension funds.

You need to have plenty business lines and several products to be relevant in large sovereign wealth funds if you want to invest and to partner with one alternative asset manager said the head of Equity Nordics at EQT, Per Franzen during an interview in Stockholm. Bigger checks can be written to one counter-party is also an important strategy for EQT.

Franzen who worked there since 2007, said that the Nordic region's biggest private-equity firm has already increased staff numbers by close to 20 percent this year about 70 people.

Recently, EQT also brought in new partners in its Equity and Mid Market businesses in North America. It adds to an existing Infrastructure team.  

According to Franzen, demand for the services that private equity funds offers grow as investors find for an escape, for they would prevent themselves from the negative rate climate that has upended return assumptions. However, nowadays to be successful, equity buyers in the private sector need to be considerably more involved as they take over in the assets.

The future of this industry is to take an entrepreneurial approach, said Franzen. To generate the type of returns as it is going to be increasingly difficult as expected by most of the investors, is just to back incumbent management teams.

In an environment with low growth, low growth rates and comparatively speaking higher valuation levels compared to history, this fact truly works, thus you really need to work with your companies and have an ambitious agenda, Franzen added.

In 1994 EQT was founded and among its investors was Sweden's famous Wallenberg family. It has more than 17 billion euros ($18.5 billion) invested in about 150 companies.

The strategies of the firm go beyond equity. It includes credit markets and real assets such as infrastructure. EQT created a 530 million-euro fund that caters long-term debt funding to medium-sized European businesses this year.

Earlier this year, it raised to 566 million euros for a new fund called EQT Ventures. It targets European technology companies. The fund lured an investor base that included HarbourVest Partners, Ilmarinen, Finnish Industry Investment, European Investment Fund, the Fourth Swedish National Pension Fund and SEB Pension och Forsakring AB.

Digitization is a tool to a successful investment strategy. EQT tends to target assets where adding digital technology can yield the biggest results. The fund has hired a number of people from Google Inc., who are then "parachuted" into EQT companies to find ways to improve the way they do business, Franzen said.

The fund tends to stay away from cyclical investments that jump up and down with swings in the broader economy. Instead, about 75 percent of EQT's three most recent equity funds focused on healthcare, services and technology as well as media and telecommunications, areas the fund plans to stay with, according to Franzen.

Furthermore, Franzen added it is a strategy designed to help EQT deal with the short-term volatility. It expects to continue over the next two years, with political risks in Europe spanning the constitutional referendum in Italy, French and German elections and talks on the U.K.'s exit from the European Union at EQT. The concept is that none of those events will fundamentally change the way the market looks now, Franzen said.

It pursue to be very liquid for its low interest-rate environment that we're in. For Franzen, he don't see economic growth picking up hugely from where they are today. His base case is that they will continue to be in this kind of muddle-through Japanese-like scenario for the next couple of years.

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