How private equity, venture capital support pensioners, and broader growth, across Europe

Until 2000 or so, institutional investors - including pension funds, insurance companies and endowments - primarily directed their investments towards public equities, public credits, and sovereign bonds. Private equity (PE) and venture capital (VC), as investment strategies, were relatively immature niches, with real estate attracting the bulk of private investment attention.

Fast forward to today, and the landscape has changed significantly. PE and VC-backed companies have emerged as major players, employing nearly 11 million people in Europe alone, or 5% of the total workforce, as evidenced by Invest Europe’s latest edition of Private Equity at Work. To put this in perspective, this workforce is larger than the entire population of Sweden!

PE and VC funds are active, long-term owners, providing not only capital but strategic and operational expertise to the companies in which they invest. This form of long-term active ownership is well suited to building and developing sustainable businesses in unlisted companies. Over the years, PE and VC investors (funds) have constantly developed their ability to contribute to their company investments in all dimensions. They now have a wide range of tools, including significant personal resources, to support their investments.

However, the impact of PE and VC goes beyond sheer employment numbers. These industries are catalysts for rapid employment growth, as evidenced by Private Equity at Work, which found that PE- and VC-backed companies have a staggering 3.5 times higher workforce growth rate than the European corporate average (7.2% vs. 2%). But the importance of the asset class transcends employment and job growth. It plays a key role in supporting society and the economy, fueling innovation at an unprecedented pace. In the face of global challenges such as the climate crisis, these investment avenues have emerged as crucial in promoting sustainable practices and technologies. Pension funds, insurance companies, and sovereign wealth funds have also generated attractive returns through their investments in PE and VC, further underlining the strategic importance of these sectors and supporting their beneficiaries.
In essence, private capital has evolved from niche strategies to becoming an indispensable driver of economic growth, innovation, and sustainability on a global scale.

AP2 is a pension fund within the social security pension system in Sweden, which manages approximately €40 billion. Established in 2001, AP2 has pursued a consistent long-term strategy of building and maintaining a global portfolio of PE and VC investments. Almost one-third of AP2’s total assets are invested in non-public assets, and this portfolio has consistently generated attractive returns; our PE and VC portfolio has significantly outperformed comparable public equity portfolios. Today, it represents 12% of total assets.
Looking ahead, AP2 remains convinced that the asset class will continue to deliver superior returns through a long-term approach with strong governance and a strong focus on innovation and growth. Given the inherent characteristics of PE and VC, there is ample room for further growth and development.

Anders Strömblad
Head of Alternative Investments
AP2 (Second Swedish National Pension Fund)
Member, Invest Europe, LP Council