Investments
An alternative investment fund (AIF) is a fund that is not a traditional securities fund. Real estate funds are the most common form in Sweden and are supervised by Finansinspektionen under the AIFM framework.
You invest together with others in a portfolio of properties that a professional manager acquires, develops and eventually sells. Below we walk through the whole journey — from the first conversation to exit.
Typical term
5–8 years
Target return (IRR)
12–20 % p.a.
Distributions
Quarterly or annually
Supervision
Finansinspektionen, the AIFM framework
The process
You register your interest and we go through your investor profile. AIF funds are normally aimed at professional investors, or at non-professional investors who meet certain requirements such as a minimum investment. Before subscription we carry out know-your-customer (KYC), anti-money-laundering checks and a suitability assessment.
You receive the fund rules or LPA, an information brochure and a subscription form. They set out the fund's strategy, risk profile, term, fees, profit sharing (carried interest), hurdle rate and how often valuation and reporting take place.
You sign a capital commitment — an amount you undertake to invest. In a closed-end fund the amount is rarely paid in at once; it is called as acquisitions are completed.
When the fund finds an asset, a capital call is issued, normally with 10–15 banking days' notice. You pay in your share and receive units in the fund corresponding to your share of total capital.
The manager acquires and develops properties according to the strategy: rent optimisation, conversion, energy efficiency, renegotiated loans and active management. This is the value-creation phase and typically takes 2–5 years.
Net operating income after interest and amortisation can be distributed on an ongoing basis, often quarterly or annually. You receive quarterly reports, annual accounts and an updated net asset value (NAV) based on external or internal valuation.
The properties are divested — individually or as a portfolio — usually after 5–8 years. Capital is repaid according to the waterfall model: first return of capital, then the hurdle return to investors, after which the surplus is shared between investors and the manager.
Good to know
Property values are affected by interest rates, vacancies, rent development and the economy. Leverage amplifies both upside and downside. Historical returns are no guarantee of future returns and you can lose all or part of your capital.
A closed-end real estate fund is illiquid. Units cannot normally be redeemed on an ongoing basis but are tied to the fund's term, although secondary transfers can in some cases be approved by the manager.
Normally an ongoing management fee on the fund's capital, a possible transaction fee on acquisitions, and profit sharing that is only paid once investors have received their capital back plus the hurdle return.