Fund-of-funds KRR IV boosting large Finnish institutions’ investments into VC and PE

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The KRR funds-of-funds offer large Finnish institutional investors the opportunity to become involved in the flurry of activity exhibited by Finland’s VC and PE market. Keva’s KRR veteran Henri Ågren and Veritas’s first-time investor in KRR Laura Wickström evaluate Finland’s VC and PE market and express their views on the fourth KRR, now closed at €175 million.

The KRR funds-of-funds managed by Tesi invest in VC and PE funds that, in turn, develop Finnish growth companies into international businesses. Over the last ten years, the KRR funds have been anchor investors supporting the creation and scaling of dozens of funds. Alongside lucrative returns, Tesi expect its portfolio funds to operate in a responsible manner and make a positive impact on society.

Keva has invested in all four KRR funds. Veritas has invested in the most recent KRR IV, which held its final closing this spring.

Henri Ågren, Keva and Laura Wickstrom, veritas
Henri Ågren, Keva and Laura Wickstrom, Veritas state that the KRR funds-of-funds offer large investors an efficient way of investing in the best Finnish VC/PE funds and so onwards into the most promising start-ups and growth companies.

1. What is your view of Finland’s VC and PE market right now?

Henri Ågren, Keva: From Keva’s viewpoint, Finland’s VC and PE market is rather small. There’s been plenty of positive developments in the market, though, and right now it’s going through a very interesting phase.

Numerous new venture capital funds have been raised in Finland in recent years. Many new-generation funds have developed favourably and are already showing good results. The gaming industry is a good example of a sector that has developed extremely well. The rise of tech companies and flurry of startup activity combined with the Slush start-up & tech events have generated a new dynamism and entrepreneurial spirit that can also be seen now in funds.

Broadly speaking, buyout funds have developed in step with venture capital funds. Many funds managed by veteran players have renewed and sharpened their focus, and new players have also stepped in.

Laura Wickström, Veritas: Although the venture capital market in Finland in absolute terms is small, Finland has risen to pole position in Europe when measured VC investments relative to GDP. The private market has broadened and deepened over the last decade, making it easier for start-ups and growth companies to access capital.

Finnish VC and PE funds today have both more experienced managers gleaned from numerous earlier funds as well as newcomers. Overall, the expertise and experience of fund managers have strengthened. Specialised funds, for instance funds investing in a specific sector, have also been raised.

From Veritas’s perspective, Finnish VC and PE funds have become more attractive. Fund managers have become more skilled and thus being able to add more value by developing their portfolio companies.

2. How attractive an investment prospect do you find Finland’s VC/PE?

Ågren: Our private equity investment programme is global and the basic criterion of our investment is always expected returns relative to risk. We feel it’s important to invest in the Finnish market also, but only a limited amount of capital can be allocated to such a small market. There are, however, quite a lot of interesting prospects in Finland.

Wickström: Always when we invest, we weigh the risk against the expected returns. We allocate a portion of our investment portfolio to more illiquid assets, such as venture capital and private equity funds. We compare their returns to equivalent listed, and thus more liquid, assets. For us to invest in a VC/PE fund, it should have better returns than an equivalent liquid investment.

3. What persuaded you to participate in KRR IV?

Ågren: Finnish funds, particularly in the case of VC funds, are rather small, and for us that makes investing in them challenging. We cannot make very small investments because an investment must be impactful on our whole investment programme. The KRR funds offer large institutions like us an excellent channel for allocating capital to Finnish VC and buyout funds and for becoming exposed to smaller players in the market.

From our point of view, KRR is a very effective concept. The funds have a relatively long horizon, but the development and results of KRR I and KRR II have been very encouraging. We greatly appreciate Tesi as a fund manager and we trust the solid professionalism of its investment team. They have good knowledge of the local market, which is essential to selecting the right funds. I also believe that they have much to offer portfolio funds.

Impact and responsibility are important criteria in all our investments, and it’s important for us to be involved through KRR in developing Finnish startups and growth companies.

Wickström: Our portfolio is global, but we also want to invest in Finnish funds. The fact that Tesi’s KRR team focuses specifically on Finland and is well resourced makes them an ideal cooperation partner for us. We don’t have the same resources to allocate to analysing Finnish private equity funds internally.

All in all, investing responsibly in private equity and venture funds requires a great deal of work. Being an investor in KRR will provide us with a good portfolio efficiently, in terms of costs and resources. Tesi’s team is also a professional sparring partner for our investment team.

4. To what extent do you invest in Finnish VC/PE funds alongside KRR?

Ågren: We make direct investments in funds, but in rather small volumes. We have longstanding relationships with a few buyout funds in which we’ve invested for a long time. This has worked well.

Wickström: Private equity accounts for some 7% of our total investment portfolio and historically 10-20% of our PE portfolio has been allocated to Finland.

KRR funds-of-funds

What they are: KRR funds function as anchor investors in Finnish venture capital and private equity funds. Tesi raised the funds together with institutional investors.

Earlier funds: The KRR I, II and III funds have invested in altogether 30 Finnish startup and growth-phase venture capital and private equity funds.

KRR IV: Other investors alongside Tesi are Keva, the State Pension Fund of Finland, Ilmarinen, Lähi-Tapiola and Veritas. The €175 million fund will invest in 10-14 Finnish venture capital and private equity funds over a five-year period.

Impact: In addition to lucrative returns, the KRR funds-of-funds expect their portfolio funds to operate in a responsible manner and make a positive impact on society, as well as promote the diversity of personnel in the portfolio funds’ teams and portfolio companies.


What it is: A public sector pension insurer serving 1.3 million public sector employees and pensioners.

Employer customers: Some 2,000 municipal organisations, state employers and church parishes.

Personnel: Some 530 employees.

Assets: The market value of investment assets at the end of 2019 was €56.2 billion.

Investment operations: Finland’s largest pension investor. Investment portfolio: investments in listed equities 37.7%; fixed-income investments 38.6%; VC/PE investments 10.4%; hedge funds 7%, and real estate 6.3%. VC/PE investments made mainly through funds.

Return on investments: At end of 2019 10-year annual nominal return was 6.8% and real return 5.4%.

Web page:

Veritas Pension Insurance

What it is: The company (formerly Verdandi) was founded in 1905 in Turku and is one of Finland’s oldest insurance companies. Provides statutory earnings-related pension insurance for employees and entrepreneurs.

Employer customers: At the end of 2019, Veritas insured 62,263 employees and managed 8,885 TyEL insurances. Veritas also insured 12,940 YEL-insured entrepreneurs.

Personnel: Some 170 employees.

Assets: Value of investments €3.7 billion at the end of 2019.

Investment operations: Fixed-income investments 40.2%, investments in listed equities 34.4%, real estate investments 16%, other investments 9.4%.

Return on investments: At the end of 2019, the average annual nominal yield over the last ten years was 5.9% (annual real return 4.5%).

Web page:

Henri Ågren

Who he is: Keva’s Senior Portfolio Manager, Private Equity, since 2012. Manages private equity and venture capital investments.

Education: MSc (Econ) from the University of Jyväskylä. Hanken School of Economics PROFIN programme 2002.

Earlier experience: Nordea Life Assurance and Asset Management divisions 1997–2012, Senior Portfolio Manager, Director.

Laura Wickström

Who she is: Deputy Chief Investment Officer and Portfolio Manager at Veritas since 2018.

Education: MSc (Econ) from the Helsinki School of Economics and Business Administration. Chartered Alternative Investment Analyst, CAIA Association.

Earlier experience: Partner and CEO at AIM Capital 2009-2018. Worked previously as Equity Sales Analyst at Granite Financial Group in San Diego and Institutional Sales, Fixed income at Alfred Berg in Finland.