AP7, Stockholm, will increase its exposure to private equity, real estate and infrastructure over the next eight to 10 years following changes to Swedish investment law.
The changes mean the pension fund can increase its unlisted investments to up to 20% of its assets, up from 10%.
"Our savers will benefit from increased allocation to illiquids with higher returns and a positive diversification effect," acting CIO Per Olofsson said in an email.
The 900 billion Swedish kronor ($88.5 billion) pension fund already invested in private equity before the legal amendments were approved by the Swedish parliament in November and became effective on Jan. 1.
AP7 will increase its existing private equity allocation, as well as adding investments in real estate and sustainable infrastructure, Mr. Olofsson said.
Mr. Olofsson said the fund plans to reach a target allocation to alternatives of between 18% and 20%, taking advantage of the maximum of investments allowed.
"Today we have 4% private equity and (our) target allocation is between 8% and 9%," he said, adding that the fund will also target 8% investments in real estate and 2% in infrastructure. "For real estate and infrastructure our main focus will be on the core strategies," he said.
Mr. Olofsson added that AP7 will focus on buyout and growth equity investments. "We don't have any plans to include private credit at this point," he added.
AP7's assets are split between fixed income and equity, including private equity, with approximately 10% invested in fixed income.
The new allocations will be funded from AP7's equity portfolio through the selling of stocks, Mr. Olofsson added.
AP7 will launch official searches for the new allocations, but a timeline for RFPs has not yet been established.