Denmark PKA AIP: selecting top GPs is crucial

PKA AIP, which manages alternatives on behalf of one of Denmark’s largest pensions, split its private equity and infrastructure businesses in April. Anette Eberhard, who becomes managing partner of the PE unit in October, tells Private Equity International about the team’s expansion plans, new mandates and direct investments.

What is your strategy when you take up your role in October?

To continue our strategy of investing in top-tier private equity and infrastructure funds. We will also continue to carry out co-investments in partnership with such funds. Our first two three-year investment programmes are so far both top quartile for their vintages and our ambition is very much to continue the successful strategy focused on partnering with select high calibre mid-market private equity buyout funds.

We do note that pricing is pretty high, but with the current set of opportunities available to us, we do feel confident that we can continue to deliver top quartile returns to the pension savers at PKA.

What are your plans for adding staff?

We will soon be eight people in the investment team and we plan to grow that number to 10-12 over the near future as we will be adding some more senior profiles to the team. We will continue to be based out of our offices in Copenhagen.

How much do you plan to deploy into private equity managers?

PKA has committed $3 billion to our third three-year investment programme running from 2018-20. In addition we are in dialogue with another significant Danish institutional investor that is interested in joining our platform, however, I am unable to comment further on that process at this point.

Tell us about AIP’s strategy split.

We have substantial activity in the US and the UK. Denmark is not a very large private equity country but we manage some investments in Denmark as well. Our ticket size is between $50 million up to about $150 million in private equity funds.

Do you have plans to become a direct investor?

We have no plans to become an active direct investor. We will continue our focus on manager selection and co-investment with managers, where we have a proven track record.

What is your view on how the global financial crisis has affected the investment landscape?

What we see now is that we’ve come back to something you could call more normal, as opposed to 10 years ago. Due to the fact the European and global economies are on a better track, there’s a huge amount of money competing to invest in asset classes including private equity. European pension funds and insurance companies have quite a large amount of money that needs to be invested due to the business we’re running. That creates quite a lot of demand also in private equity and infrastructure. I think that what will be the challenge for AIP in the future is to make sure that we’re not investing at too high prices – we need to do our best to create good returns for the members of the pension fund.

As an LP how do you ensure you don’t pay high prices?

We are of the view that private equity investing is a long-term game and it is difficult to foresee how the pricing environment will be over the next decade. We are an all-weather investor looking to build long-term partnerships with top GPs. We believe that top GPs will return attractive returns in all parts of the business cycle and as such, we worry less on current pricing and instead focus our efforts on selecting top GPs.

How do you get access to the best US managers?

Over the years, we have been very active in mapping out and meeting with relevant mid-market and lower mid-market buyout managers. We have also spent time with market intermediaries, presenting who we are and what we do. It is my firm understanding that our access to the best US managers have never been better.

Anette Eberhard is chief executive of EKF Danmarks eksportkredit, Denmark’s export credit agency and will assume her role at PKA AIP on 1 October. PKA manages around DKr275 billion ($44 billion; €37 billion) on behalf of around 300,000 members in the social welfare and healthcare sectors.