​AP funds defend Northvolt investment amid domestic media scrutiny

Sweden’s big four AP national pension buffer funds have defended the way they invested in the now-collapsed battery company Northvolt, using a joint venture firm they set up themselves, saying that despite criticism by Swedish public television, it was all within the rules.

AP1, AP2, AP3 and AP4 issued a combined statement on the matter on Friday in response to reports earlier in the week by Swedish national TV broadcaster SVT questioning the wisdom and legality of the funds’ investment, which has resulted in SEK5.8bn (€527m) of losses between the four funds. 

The television reporting was critical of the funds having created a “complicated structure” to buy shares in Northvolt, when they were prohibited by law from buying unlisted shares directly.

SVT also quoted Katarina Staaf, chief executive officer of AP6 – the smaller national pensions buffer fund that invests solely in private equity – as saying her fund had decided not to invest in Northvolt, having deemed it to be too risky.

Staaf said investing in a large company in an early phase and without profitability was outside AP6’s strategy.

SVT also complained requests to interview the AP funds over a six-month period had been refused, with email replies given instead.

‘In line with the AP Funds Act’

The four larger AP funds, which owned Northolt via their joint venture 4 to 1 Investments, said: “The AP funds have transparently and extensively answered questions from SVT and other media.”

The funds, which together manage SEK2trn of buffer capital in Sweden’s income pension system, said they also “welcome the opportunity to inform the Finance Committee on 6 May and contribute with further clarity to the issues raised in the media reporting”.

“The AP funds’ investment in 4 to 1 Investments and thereby Northvolt was made in line with the AP Funds Act and its investment rules, which state that unlisted shares may be owned through a venture capital company,” the funds said in their statement.

Responding to criticism that the board of 4 to 1 Investments, which made the investment decision, consisted of officials from the AP funds, the funds said that the preparatory work for the AP Funds Act explicitly stated that the funds could serve on the boards of directors of venture capital companies.

They were represented on the board of 4 to 1 Investments by managers and senior managers from the investment operations, the funds said, adding that their employees had relevant expertise and extensive experience in evaluating investments.

“In order to strengthen 4 to 1 Investments’ internal capacity, external expertise was engaged with responsibility for the ongoing management, as well as to provide expertise in financial accounting and legal matters,” the funds said.

But as shareholders in 4 to 1 Investments, the AP funds also said “we would naturally have wished that the investment in Northvolt had developed differently”.

The bankruptcy of Northvolt was serious for many, they said, adding: “It is a loss for the Swedish economy and Skellefteå in particular, for Northvolt and of course all employees.”