Klarna investment helps lift Skandia’s PE portfolio to all-time high

Private equity recorded its best performance last year for the €60bn Swedish insurer ahead of a year when returns will be ‘challenging’ to replicate, its senior portfolio manager tells PEI.

Swedish insurer Skandia Mutual Life Insurance Company’s private equity portfolio posted its highest returns ever last year, boosted by its heavy exposure to tech assets and buyout funds.

The Stockholm-headquartered institution’s €9 billion private equity portfolio generated an 89 percent return in the 12 months to December, skyrocketing from a 6.7 percent return in 2020, according to a statement.

Skandia’s buyout portfolio, which delivered a 72 percent return in 2021, mainly drove private equity’s standout performance, according to Natalia Ilmark, a senior investment and portfolio manager, private equity at Skandia.

“Manager selection is key here – we try to run a more concentrated, high-conviction portfolio and not diversify it too much that it ends up being an index fund,” said Ilmark. “We spend a lot of time in the US meeting and building relations with the managers and this has put us in a position where we get access to the best funds.”

She noted, without identifying names, that the investor has mainly backed tech-focused GPs, specialists and buyout groups in both Europe and the US.

Skandia has backed funds managed by Ardian, Sofinnova Partners and Priveq Investment, PEI data shows.

Within the private equity portfolio, venture capital and growth posted a return of 124 percent last year.

Ilmark noted that Skandia’s investment in the Swedish fintech company Klarna – having invested directly into the company in 2015 as well as indirect exposure through multiple funds – was a large portfolio driver. Skandia’s stake in the firm, known for its post-purchase payments platform, is worth Skr 5.5 billion ($590 million; €520 million) and has generated a 15x multiple on invested capital as of December. Skandia was also an early backer of data and AI company Databricks, software company Hashicorp and fintech company Plaid, investing some $4 million among them, which has thus far generated a return of 40x.

Skandia’s private equity holdings, which include buyouts and venture investments in Europe and the US, accounted for 14.6 percent of Skandia’s total assets as of end-December, compared with 9.9 percent at the end of 2020.

The €60 billion investor has steadily increased its long-term allocation target for private equity in recent years. It had a 2 percent target to private equity, which was increased in 2007 to 10 percent. That was increased to 13 percent in 2021, Ilmark noted. On average, Skandia commits some SKr 15 billion per year to buyouts, venture and infrastructure.

Skandia has a team of eight investment professionals, led by Daniel Winther, head of PE and infrastructure. The team manages SKr 110 billion, of which buyouts make up SKr 55 billion, venture Skr 35 billion and infrastructure SKr 20 billion

While returns have been “great”, Skandia does not expect the same high levels over time, Ilmark noted. “This year in particular will be more challenging with concerns over what inflation will do to interest rates and the impact that this might have on the valuation of growth companies,” she said. “The long-term outlook remains strong, however, and the rapid technological development will continue to create good opportunities for new companies to challenge and change the existing competitive landscape.”