Nordic PE Forum 2020: Healthy appetite for Nordics during the pandemic

Nordic PE Forum2020 investor panel

The panellists described the Nordic market as one of the most vibrant ones in Europe, with stable and resilient economies, robust legal systems, and very well-established PE managers.

During this year’s digital Nordic PE Forum, Argentum’s Ingibjörg Meyer-Myklestad joined a panel of investors to talk about the appetite for investments in the Nordics in turbulent times, and the role that ESG play in fund selection.

“It’s a challenging market. However, we do see high activity on the fundraising side, and 2020 is set to be a new all-time high for buyout fundraising in the Nordics,” Meyer-Myklestad, Argentum’s Head of Corporate Affairs said when asked about the appetite for Nordic investments at the moment. Watch a recording of the panel debate here.

“Nordic buyout fund managers have already raised 11 billion euro this year, and we expect they will have raised closed to 30 billion by year-end,” Meyer-Myklestad added. Last all-time high was in 2018 when buyout fundraising hit 22 billion euro (read our full analysis of H1 2020 here).

For the Nordic venture segment, fundraising in 2020 is expected to land around 1.5 billion euro, which will make 2020 a decent year, albeit not above the top years of 2016 (2.3bn euro) and 2019 (2.9bn euro). The corona crisis will, naturally, affect the funds’ ability to close during Q4.

Deserving of higher multiples

In addition to Meyer-Myklestad, the panel consisted of Marcus Daleke from Skandia, Simon Faure from M&G Private Equity Investments, and Joana Rocha Scaff from Neuberger Berman. Pollen Street Capital’s Magnus Christensson moderated the conversation.

The panellists described the Nordic market as one of the most vibrant ones in Europe, with stable and resilient economies, robust legal systems, and very well-established PE managers. A drawback for the Nordics has been higher valuations, which the panel thought is deserving because of the region’s focus areas, e.g. tech, health, fintech and industrial automation. Compared to other assets, these have proved to secure growth.

A more benign macro-economic environment compared to other regions also leads to more competition, because international investors – and especially funds based in the UK and the US – are attracted to the Nordics. This further increases the entry multiples, the panel pointed out, but empirical evidence justifies the pricing; “it is worth the effort,” as one panellist put it.

Pressure on LPs to disclose ‘greenwashing’

The importance of ESG when selecting managers was also a topic during the debate.

“ESG has been important since Argentum’s inception. It is part of the due diligence process and central to the investment committee, and do an annual ESG review every year,” Meyer-Myklestad said.

“There is more pressure on us as LPs to differentiate between those walking the walk and talking the talk. ESG should not be used as a marketing tool, and our job is to find out what is ‘greenwashing’ and not,” she added.

On the risks that are most pressing to LPs, Meyer-Myklestad pointed to climate risk.

“Climate risk, and especially transition risk, is important for us to track. We are following the work in the EU around a taxonomy closely, and how it will affect the work we do in the finance sector.”

The Nordic PE Forum brings together stakeholders from the Nordic and UK-based asset management communities, from fund managers to banks, investors and advisory firms, the Nordic Private Equity Forum is a great way to connect with the Nordic PE ecosystem.