The Ministry of Economics (MoE), the Financial Industry Association (FNA), and the Development Finance Institution ALTUM, in cooperation with pension fund managers, have agreed to establish a new investment instrument – the “Growth and Defense” fund.
Pension fund managers involved in the fund’s development include Swedbank Investment Management, CBL Asset Management, SEB Investment Management, Luminor Asset Management, and INVL Asset Management.
The fund’s objective is to promote the development, innovation, and resilience of Latvian companies by investing in the equity of Latvian enterprises, including companies in the defense sector, as well as infrastructure and public-private partnership (PPP) projects.
The planned fund size is €100 million, with potential for expansion. Investors will include second-pillar pension fund managers, investment funds, ALTUM, and other institutional investors, ensuring a balanced financing structure.
“The collaboration model developed for this fund is an example of how private and public capital can support the Latvian economy. This new instrument will strengthen the local capital market and increase the availability of long-term investments. It will also provide an opportunity for citizens, through pension fund managers and investment funds, to participate as investors, promoting entrepreneurship in Latvia,” says Economics Minister Viktors Valainis.
The fund will operate on commercially viable terms, following internationally recognized risk management principles and good governance practices, developed in line with the recommendations of FNA and the Latvian Private and Venture Capital Association (LVCA) on better risk management for alternative investment funds attracting pension fund resources.
The fund aims to achieve an annual return on investment above 10%, providing pension plan participants with benefits from local economic growth while strengthening the capacity, export potential, and resilience of Latvian companies against global shocks.
“The involvement of pension fund managers and ALTUM in this fund is a clear signal that there are companies and projects in Latvia worth investing in. This instrument will allow pension capital to be transformed into real company growth and modern infrastructure. Institutional investor participation in Latvian companies’ equity is a crucial prerequisite for developing the Latvian stock market from a niche segment into a full-fledged pillar of our economy,” says Uldis Cērps, Chairman of the Board of the Financial Industry Association.
The fund will make equity investments in small, medium, and large enterprises, with a single investment not exceeding 30% of the fund’s subscribed capital.
ALTUM Board Chairman Reinis Bērziņš states: “We have already demonstrated that local capital can be a strong growth driver – during the Covid pandemic, the first ALTUM Capital Fund helped companies not only adapt but also grow. Four of the companies supported by the first fund – Hestio, Elko, iCotton, and OC Vision – successfully leveraged the capital market by listing on the stock exchange. Now, creating a continuation of the Capital Fund focused specifically on defense and infrastructure projects is the next step. Pension fund involvement is particularly important, as it not only expands the opportunities in the local capital market but also allows pension savings to directly participate in company growth, generating positive returns for both the economy and future pensioners. The new fund will strengthen the capital market ecosystem, which already includes ALTUM co-financed venture capital instruments, the Baltic Innovation Fund, and the recently launched Baltic Capital Market Acceleration Fund. This year alone, ALTUM has invested €100 million in these instruments.”
The fund’s operations will be overseen by a dedicated Supervisory Committee, comprising representatives from all investing pension fund managers and ALTUM. The committee will have the right to review all major investment projects before the investment is made, ensuring high transparency and accountability.
For the fund to begin operations, approval from the European Commission and amendments to the ALTUM governing decision are required.