Get the right experience for you. Please select your location and investor type.
From Sweden, With Love
Trip report - September 2024
One could be forgiven for overlooking Sweden as an investment destination: its total population numbers 10.5 million people, less than the population of Paris (c.11.2 million) and barely double their own count at the end of the 19th century1, and Swedish stocks comprise only 5% of the MSCI Europe Index.2 Yet our trip to Stockholm in September reaffirmed our conviction in the treasures Sweden offers to the world – ideas, products, and people.
Good Swedish ideas may be historic in origin, but are resolutely contemporary in application. Bergman & Beving was founded in 1906 but developed the serial acquisition business model in the 1980s by buying niche product businesses, allowing them to run autonomously, and using their cash flows to fund further acquisitions. Its 2001 spin-offs, Addtech and Lagercrantz, utilise the same model - as well as many other Swedish industrial acquirers, including Indutrade, Instalco, and Lifco.
The appeal of decentralisation, however, extends beyond industrials into the worlds of technology and banking. Vitec Software acquires niche, specialised software businesses, such as Ecclesia, which provides software as a service (SaaS) for the administration of Norwegian cemeteries and crematoria. Similarly, Handelsbanken, founded in 1871, continues to operate decentralised branches which only cover as far as one can see from the nearest church spire; an unusual banking model which recently received visitors from a South Korean peer eager to learn its nuances.
Even when Swedish decentralisation and serial acquisition has been successfully exported there seems to remain something to learn from its originators; the CEO of a successful Canadian software acquirer, Constellation Software, had been visiting many serial acquirers in Stockholm the week prior to our visit.
More tangible exports have built the success of Swedish industrial Atlas Copco, which derives more than 70% of its sales from outside Europe.3 From its pioneering work in the 1950s on the ‘Swedish method’ – a more ergonomic and efficient pneumatic mining drill – Atlas has built a formidable and broad portfolio: air compressors, vacuum pumps, and industrial tools.
Many of Atlas’s products were on display in their test mine, shared with former subsidiary Epiroc, 20 metres below the head office in Nacka. All new products must be more efficient or more ergonomic; examples of their innovations vary between all-electric air compressors to specially adapted grinding tools to reduce vibrational injuries amongst workers. Nor does product innovation preclude the possibility of new and exciting applications by customers, such as using oil-free air compressors to construct ‘bubble curtains’ around offshore wind developments, reducing noise by over 90% and protecting marine wildlife.4
In many respects, the range and depth of opportunities ahead of Atlas Copco belie its origins in Sweden’s 19th century railway system. This is testament to its employees’ capacity to think and act for the very long term; its CFO, Peter Kinnart, has spent 31 years there in nine different roles, backed by the enduring involvement of the Wallenberg family for the past 151 years.
Responsible stewardship has been a tailwind behind many Swedish companies, such as retailer Axfood, majority owned by the family-run Axel Johnson Group, and access systems provider Assa Abloy, over which the Douglas and Schörling families retain 40% of voting rights.3 Engaged and informed stewardship has allowed long-tenured management teams to operate autonomously and effectively within a high-trust environment, for the benefit of all stakeholders.
Admittedly, there is no one element of the above – long-term management teams and stewards, world-class products or interesting ideas – that one can describe as uniquely Swedish. But their lasting and dynamic combination within Sweden has been, and continues to be, a potent force in shaping our world.
Sarah Sheard
Subscribe to our updates
To get regular updates and content from Stewart Investors, please register here.
Important Information
This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.
We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. To the extent this material contains any measurements or data related to environmental, social and governance (ESG) factors, these measurements or data are estimates based on information sourced by the relevant investment team from third parties including portfolio companies and such information may ultimately prove to be inaccurate. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change.
To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.
To the extent this material contains any ESG related commitments or targets, such commitments or targets are current as at the date of publication and have been formulated by the relevant investment team in accordance with either internally developed proprietary frameworks or are otherwise based on the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned Investment Initiative framework. The commitments and targets are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments and targets depend on the ongoing accuracy of such information and representations as well as the realisation of such future matters. Any commitments and targets set out in this material are continuously reviewed by the relevant investment teams and subject to change without notice.
About First Sentier Investors
References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group. Certain of our investment teams operate under the trading names FSSA Investment Managers, Stewart Investors, RQI Investors and Igneo Infrastructure Partners, all of which are part of the First Sentier Investors group.
We communicate and conduct business through different legal entities in different locations. This material is communicated in:
- Australia and New Zealand by First Sentier Investors (Australia) IM Ltd, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)
- European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in Ireland by the Central Bank of Ireland (CBI reg no. C182306; reg office 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; reg company no. 629188)
- Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors, FSSA Investment Managers, Stewart Investors, RQI Investors and Igneo Infrastructure Partners are the business names of First Sentier Investors (Hong Kong) Limited.
- Singapore by First Sentier Investors (Singapore) (reg company no. 196900420D) and this advertisement or material has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B), FSSA Investment Managers (registration number 53314080C), Stewart Investors (registration number 53310114W), RQI Investors (registration number 53472532E) and Igneo Infrastructure Partners (registration number 53447928J) are the business divisions of First Sentier Investors (Singapore).
- Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611)
- United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (reg. no. 2294743; reg office Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB)
- United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167)
- other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (FCA ref no. 122512; Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB; Company no. SC079063).
To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.
© First Sentier Investors Group
