Own analysis tool based on data from more than 20 years of fund assessments
AP6 is very selective when choosing partners. It would rather have portfolios with few partners that meet AP6’s requirements, than many partners who have interests that might be conflicting. With each fund assessment, AP6 always conducts due diligence using its own analysis tools and databases. It also holds meetings and discussions on the matter.
Data and experience from prior fund assessments is used, along with processed information from more than 900 portfolio investments made by 20-30 fund teams.
AP6 has developed its own tool, the AP6 scorecard, which is used to identify and evaluate the most relevant aspects to be considered when assessing a fund.
With more than 20 years of experience investing in funds, the organization has acquired a deep understanding of the special dynamics and complexity associated with the various phases and structure of each fund.
AP6 adjusts its methods and tools for evaluating funds over time, since it is constantly striving for continual development and improvement.
Assessment of the team
Analysis of the team’s expertise and strengths in various sectors and industries. Relevant geographic coverage. Assessment of shared interests regarding the remuneration model. Review of questions concerning staff turnover and succession planning.
Analysis of returns over time (total, geographically, by sector and asset category). Analysis of the investment rate and size of acquisitions, along with losses in the portfolio. The realization multiple is analyzed and assessed.
Assessment of the investment strategy’s continuity as regards geographic focus and specific industrial expertise. Quality of the existing network. Aspects that are unique to the strategy are compared to competitors. Assessment of the market position as regards sourcing of investments, value creation and the portfolio’s realization multiple.
Analysis of the quality aspects for sourcing. The extent to which it is based on own hypothesis and analysis. Extent to which there are different teams for each sector and geographic area for sourcing efforts. Also, whether there is a senior network. Analysis of investment decisions based on the supporting documentation and how various types of risk are managed. Analysis of value creation in investments that have been made. Existence of various models for value creation. Existence of systems for early-identification of deviations.
AP6 uses its own scorecard to assess the sustainability efforts of funds. It has three main categories. The first category assesses the extent to which sustainability issues have been implemented in a fund’s investment process. In other words, to what extent has a fund included sustainability issues in its processes for evaluation, decisions, agreements and action plans for its holdings. The second category assesses how the fund implements sustainability issues into its owner activities and, to what extent that impacts portfolio companies. Finally, an assessment is made of the fund’s reporting and monitoring of sustainability issues to its investors. To what extent is reporting done as written reports, verbally, or as incident reporting to the investors.
AP6 Fit is the extent to which a fund meets the criteria for being a partner to AP6. Here, an overall assessment is made based on the contract terms and conditions, fees, AP6’s ability to influence, transparency and openness. For the fund’s investment strategy, an assessment is made of the extent to which it is consistent with AP6’s strategy. Another component of the assessment is the opportunities that exist for AP6 to make co-investments. An assessment is also made of the extent to which an investment in a fund helps increase the diversification of AP6’s portfolio.