Swedish pension buffer funds, AP1, AP2, AP3, and AP4, have defended their Northvolt investment made through their jointly owned 4 to 1 Investments firm, stating that it was made in accordance with the AP Funds Act and its investment rules, which state that unlisted shares may be owned through a venture capital company.

4 to 1 Investments recently wrote off SEK 5.8bn in assets it had invested in troubled battery manufacturer Northvolt, which filed for bankruptcy in Sweden last month.

Public television company SVT has since claimed that the pension funds may have broken the law by investing in the battery maker.

Although AP funds cannot buy unlisted shares directly, they may do so through an intermediary.

Therefore, SVT suggested that in 2021, the AP funds set up a venture capital firm named 4 to 1 Investments to invest in Northvolt.

However, according to SVT, this joint company was a "construction without employees."

It cited documents from the Swedish Companies Registration Office, among others, showing that the AP funds bought a warehouse company and a limited partnership less than two months before the first share purchase in Northvolt.

When the purchase of Northvolt shares was announced on 9 June, even the AP funds' chosen name for the limited partnership, 4 to 1 Investments, had not yet been registered with the Swedish Companies Registration Office.

Consequently, SVT suggested that the opportunities for the AP funds' venture capital firm to analyse and decide on the Northvolt deal appear to have been very small.

In a written response, the four AP funds said they was transparent about the form of investment in the information it published at the time of the investment and has responded "transparently and extensively" to questions from SVT and other media since then.

They argued that their investment in 4 to 1 Investments was prepared and decided within the respective AP funds' management organisation per their established investment processes, while the investment in Northvolt was prepared and decided by the 4 to 1 Investments board.

It added that the AP funds' employees possessed relevant expertise and extensive investment evaluation experience, and to strengthen 4 to 1 Investments' internal capacity, external expertise was engaged to provide expertise in financial accounting and legal matters and to take responsibility for ongoing management.

Following Northvolt's bankruptcy, the Swedish Parliamentary Finance Committee will question the CEOs of the four major buffer funds in Sweden's public pension system at a session next month about their joint investment in the company.

The four AP funds said they welcomed the opportunity to inform the Finance Committee and provide further clarity on the issues raised in the media reports.

---