What Nordic LPs and GPs Say About Pension Capital in a Faster Market: "It Takes a Lot of Courage From the Whole Ecosystem"

The private market was built for a world that is slowly disappearing while something new is evolving. Deal cycles are getting shorter. Technology life cycles have dropped from two years to six months. AI is changing how companies are built and how they are assessed, and geopolitics is reshaping where capital flows.

How this will play out for fund managers, institutional investors and exits, no one knows yet. What we do know is that the private market has to evolve, and decide what kind of ecosystem it wants to be.

On some things, LPs and GPs already agree. They need to work more closely together. They need to strengthen Europe and the Nordics. They need a better understanding of technology. And they need to keep talent here.

That was the starting point when we sat down with Rasmus Bessing, Co-CIO Responsible Investments & Investment Products at PFA, and Lars Dybkjær, Managing Partner at GRO, in conversation with Jacob Høeg Madsen, Partner at Kromann Reumert.

Capital and technology move at different speeds

GRO is a private equity firm backing complex B2B software companies across the Nordics and Europe, with a growing focus on industrial AI and cyber. From that seat, Lars Dybkjær sees a Danish PE scene that has matured a lot over the last 10 to 15 years. Stronger funds, better talent, and returns that hold up well against European peers. But with the pace of technology and AI, the harder part has become to keep up with the technology itself.

Life cycles are down from two years to now six months. It is almost a full-time job to really figure out what is happening.

Keeping up has become work in its own right. For those who sit a step further away from the companies, the gap only grows.

Lars shared an example from the portfolio. When a customer’s oil refinery was hit in a conflict zone, the technicians’ first call went to the software company. It held billions of daily data points on heat, gas leaks and metal stress, and knew which pipe to turn down first. Software has become the brain telling people what to do, and few investors ask the questions that get to that level.

His proposal was simple: let’s spend more time together. Regular sessions where GPs and LPs educate each other on how fast things are moving.

We don’t even mind hosting webinars every month to help educate the whole ecosystem, including private equity, but also the pension funds, on what is actually happening, because it’s moving so fast.

PFA is one of Denmark’s largest institutional investors, providing pensions for more than 1.3 million Danes and managing around DKK 800 billion. For Rasmus, closeness starts with trust. PFA looks at track record, team, sourcing and execution. What matters just as much is how a manager behaves once the money is in, especially when a portfolio company runs into trouble.

One of the important things is that you don’t hide the bad stuff. It’s important that you have transparency and you can have a dialogue about the things that are not necessarily going the way that you want to.

Trust is built in difficult moments. A manager who shares bad news early gives the LP something to work with, and that is what turns a commitment into a relationship.

Size has become a safe haven

Kromann Reumert is one of Denmark’s leading law firms, and Jacob works closely with fund managers and institutional investors across the private capital ecosystem. He pointed to a paradox. The last years have been historically tough for fundraising, and you might expect capital to flow to mid-sized managers, who often deliver strong returns. Instead, more capital went to mega funds. His explanation was that size buys predictability.

You may have yield compression, but you also have less volatility in your returns for those big funds. So it was sort of a safe haven.

When the outlook is uncertain, predictability wins, even if it costs some upside.

Rasmus explained part of the logic from the LP side. Commercial pension funds compete for their clients in tenders roughly every three years, and the clients’ priorities are clear.

What our good customers look at is cost, cost, cost, then returns.

That order shapes everything that follows. Private assets cost more than listed equities. Venture adds a J-curve and a long wait. Pension funds also carry a fiduciary duty, and political expectations on where to allocate shift over time.

All of that sets limits on how far they can stretch. So are Danish managers ambitious enough?

Lars sees it happening already, through multi-strategy platforms and continuation vehicles that give strong companies a longer runway. All Danish funds together are still smaller than a single EQT, and he believes the right to grow has to be earned.

Rasmus added a counterpoint. Managers need a certain size to meet reporting and team requirements. Yet PFA has also been moving toward more agile funds that can operate in smaller segments, because the largest funds can’t see every opportunity.

It’s not necessarily always an advantage to just be huge.

Large deal sizes come with blind spots. Smaller, focused funds reach companies the giants pass on, and that gives a portfolio a different kind of strength.

The best companies leave, and so does the talent

One consequence of today’s market is visible in the exits. When a Nordic tech company reaches DKK 400 to 500 million in revenue, there are very few European buyers ready to take it further. Seven of GRO’s last ten exits went to US buyers. For Lars, the cost reaches well beyond the individual deal.

Then we lose IP, we lose really interesting jobs, we also lose talented people.

When a company moves, the knowledge and the people move with it. The Nordic ecosystem loses exactly the experience the next generation of companies would need.

What it will take

The panel saw several ways the market could evolve. Lars called for larger, technology-focused European funds in the range of 5 to 10 billion under management, along with more co-investment. He pointed to Copenhagen Infrastructure Partners and PensionDanmark as proof of what long-term conviction can build: a global leader with an ecosystem of talent around it. GRO’s own story shows the same thing on a smaller scale. Its first investor has now backed four funds in a row.

It’s very nice to have stable Danish pension funds behind you.

Consistency compounds. Stop-go commitments do the opposite and make foreign LPs ask why Danish investors seem more volatile.

Rasmus pointed to the wider capital market. Many companies have a stronger short-term business case in the US, and a deeper European capital market would help on both funding and exits. Jacob took it a step further and questioned a distinction the industry has long taken for granted.

Maybe we have historically thought too much of the liquid market as one market and the alternatives market as another. Maybe those two are going to converge more in the future than they have historically.

If they do, Nordic companies could get more exit routes than the trade sale. A stronger capital markets union could make true dual-track exits possible. Jacob also shared that early discussions have started about a Nordic growth fund, inspired by the European one in the making, and raised the question of whether a sovereign growth fund belongs in the conversation.

None of these solutions come free. Rasmus was clear that someone has to give something up to make them work, and that no single player can carry it alone.

It takes a lot of courage from the whole ecosystem.

That might mean pension funds committing to more local funds. It might mean managers building bigger platforms. It might mean countries agreeing to a more European capital market. Where the private market lands in ten years is still open. What the conversation made clear is that LPs and GPs will need to shape it together.