The long-term strategy is focused on an allocating funds in the Buyout, Venture/Growth and Secondary segments. Within Buyout, allocation is a combination of fund commitments and co-investments. Within the Venture/Growth and Secondary segments allocation consists of fund commitments.
An important component in the strategy is to find the best fund managers in each segment and then continue to invest with the selected managers as long as AP6 is satisfied with the partnership in terms of returns, strategic direction, sustainability, shared values and other cooperation, like the opportunities to carry out co-investments.
AP6 has a very long-term view of the collaboration with selected fund managers. The funds that are interesting for AP6 to invest in are normally heavily oversubscribed and it takes a long time to work up a new fund relationship. In an established portfolio like the one AP6 has, the majority of new fund investments are made in already existing fund relationships.
Working with a combination of fund investments and co-investments in the buyout portfolio is a key part of the strategy. The value creation that occurs in mature companies make up for the largest portion of the market for private equity.
Sustainability is particularly important, given the long investment horizon and illiquid nature of private equity since opportunities for exiting investments that are not sustainable are limited. With such long-term holdings, it is important to try to assess what is sustainable several years into the future. Sustainability assessments are not only important prior to making a fund commitment or co-investment, but also during the ownership phase, when there are significant opportunities for pursuing sustainability in a sector where the business model is corporate governance.