Swedish fund looks to joint venture investments

Swedish fund AP2 is directing its alternative asset investments into innovative joint venture company structures, in an effort to maintain a greater degree of control over real asset investments.

The second so-called Swedish buffer fund recently used the investment vehicle in March to invest first in European real estate and most recently to buy agricultural farming land in Australia, Brazil and America.

Instead of investing through a real estate fund or other vehicle, AP2 and its fellow Swedish fund AP1 each took a 50 per cent stake in the newly formed real estate investment company.

The two funds invested a combined $734 million to target prime office premises in major European cities. The investments would be managed by European finance group Catella.

Last month the fund announced it would partner with US firm TIAA-CREF to invest $250 million in farmland through a similar joint venture arrangement.

“It (the joint ventures) gets us closer to the investment, and it is a more efficient process where we can use our own resources in a better way,” AP2 chief executive officer Eva Halvarsson said.

“We hope that it might become more cost-efficient directing directly this way. Since we are getting closer to the investment process –we would be on the board ourselves — we have more say on the investments.”

Halvarsson said a key reason for investing with TIAA-CREF was that the funds shared similar views on sustainability issues, with both being signatories to the United Nations Principles for Responsible Investment.

TIAA-CREF already had agriculture investments across 400 properties worth more than $2 billion.

The pension fund – which Halvarsson said could look at up to 40-year time horizons when deciding its investment policies – also saw the joint venture arrangements as a way of building long-term management practices into how investments were handled.

“It was important to invest with someone who has the same long-term values as we had, we are not interested in buying and selling but more the holding of good agriculture properties,” Halvarsson said.

The fund had previously the used the joint venture structure in managing local real estate investments in Sweden but this was the first time it had applied this method of investing when looking to diversify its real asset holdings abroad.

AP2 had looked to diversify its risk exposure by increasing allocations to alternative assets, and particularly real assets.

Halvarsson said agriculture was an attractive asset class because it was uncorrelated to financial markets but would also fit into long-term thematic views around global population growth and increasingly scarce resources.