Swedish pension trio plug $970m into new infra investment company

Polhem Infra’s backers believe it will have a competitive advantage by investing to hold rather than to sell.

 Swedish pension groups AP1, AP3 and AP4 have set up an infrastructure investment company that will initially pool SKr9 billion ($970.8 million; €858.4 million) of retirement capital.

Polhem Infra will target assets in the renewables, energy storage, energy distribution and digital infrastructure subsectors. The vehicle will be focused on unlisted infrastructure investments, primarily in Sweden, though there will be the scope to invest in other Nordic countries.

Tobias Fransson, head of strategy and sustainability at AP4, said Polhem Infra’s focus would be on the “lower risk end” of the market, and that it was looking for stable and cash-generating opportunities. The vehicle’s return targets have not yet been disclosed.

“We had three pension funds that had identified infrastructure as an attractive asset class, and want to allocate significantly more in the long term,” Fransson told Infrastructure Investor. “We have historically cooperated in real estate companies.”

He added that the long-term nature of the company and the capital it is to invest will be among the “competitive advantages” that will help the funds as they look to cooperate with

“We don’t have a fund with a limited time or lifespan,” he said. “We can invest to hold and not invest to sell at some point in time. We are manging pension funds on behalf of Swedish pensioners and it’s a public authority pension fund, and we hope this will signal some kind of stability to the Swedish public.”

Each pension fund will be allocating an initial SKr3 billion to Polhem Infra. There is no set timeframe for when the capital should be invested. Fransson said there were “ambitions” to grow this to more than SKr 9 billion, though the plans have not been resolved yet.

AP4’s current allocation to infrastructure is only 0.5 percent. The bulk of the fund’s real assets portfolio comprises property investments, which include social infrastructure-like deals. It has also committed to infrastructure funds run by local managers, such as Infranode and EQT Partners.

AP1 and AP3 have slightly higher allocations. In March 2015 the two funds were involved in a SKr60.6 billion deal, alongside the Ontario Municipal Employees Retirement System and Folksam, to buy Swedish electricity distribution business Fortum Distribution, now known as Ellevio.