Stockholm has quietly turn into one of the vital environment friendly funding facilities in Europe. The Economist lately dubbed Stockholm “Europe’s new capital capital,” citing a surge in IPOs, elevated non-public fairness exercise and rising demand for Swedish company bonds. For funding practitioners and institutional traders, the query is just not merely why capital is flowing into Sweden, however what options of its market construction maintain this circulation.
Having been concerned within the Swedish funding neighborhood for greater than a decade, I used to be curious whether or not the current power in IPO issuance, non-public fairness exercise, and progress within the company bond market mirrored deeper structural and cultural components than simply short-term market circumstances.
Conversations with native market contributors counsel that Stockholm’s success displays a broader ecosystem formed by a robust funding tradition, supportive institutional design, and long-term method to financial decision-making.
These conversations had been mirrored in The Economist. The journal lists a number of explanation why Stockholm is a superb selection for corporations on the lookout for new capital.
Sweden has main PE gamers supporting the ecosystem. Sweden-based non-public fairness agency EQT Companions has raised US$113 billion since 2020, second solely to US-based KKR (which manages greater than $720 billion in belongings worldwide). Sweden’s public inventory market is booming. The Economist reported that greater than 6 billion euros ($6.8 billion) had been raised on Nasdaq Stockholm this 12 months, “a a number of of comparable figures on different inventory exchanges.”
sturdy funding tradition
An vital historic improvement for understanding the character of Swedish funding tradition was the launch of Allemansfonden (actually “everybody’s fund”), a sequence of state-backed funding trusts launched within the Nineteen Eighties. The initiative was a landmark second for Sweden, encouraging widespread funding by providing tax incentives to fund contributors. This was a profitable technique and considerably elevated the variety of contributors within the inventory market in comparison with different international locations. Presently, Sweden stands out globally for its excessive mutual fund funding charges, extra just like the US than to Europe.
Sofia Beckman, chief funding officer at Nordnet Fonder in Stockholm, gives useful background, saying: “70% of Swedes spend money on funds in private accounts, they usually additionally profit from very low index fund charges, normally solely 20-30 foundation factors. Alongside these private investments, there’s a sturdy system of obligatory pension financial savings.”
The federal government additionally emphasizes long-term monetary planning and safety, Beckham mentioned. “This deep-rooted funding tradition has led to a choice for low-cost, low-volatility funding merchandise.”
Julia Axelsson, portfolio supervisor at Swedbank Lubar, mentioned secure company bond issuance could be simply absorbed by native institutional traders and mutual funds that additionally provide participation to retail purchasers. This creates constant liquidity and makes elevating capital in any respect phases of an organization extra environment friendly, he defined.
Axelsson added that one other cultural issue that will clarify the success of Sweden’s capital markets is its openness to the world, noting its keenness to undertake finest practices wherever attainable. “A globally built-in monetary ecosystem is a prerequisite for regional capital markets to thrive.”
Social norms that help equality
In Sweden, society grew to become extra egalitarian within the Nineteen Sixties and Seventies, and social norms are actually firmly embedded within the system. For instance, ladies wouldn’t have to surrender their careers once they have kids, and every father or mother is entitled to 280 days of paid maternity and paternity go away. Dad and mom normally share childcare obligations, akin to staying residence to look after a sick youngster.
Aline Reichenberg Gustafsson, CFA, editor-in-chief of NordSIP.com, calls out the nation’s entrepreneurial spirit. “Sweden has a particular sort of socialism that tends to encourage ‘unicorn’ entrepreneurship.” At 20.6%, the company tax fee is among the many lowest in Western Europe, barely above Finland (20%) and Switzerland (19%), however decrease than Denmark and Norway (22%), the UK and Belgium (25%), France (25.8%) and Germany (29.9%).
One other notable characteristic of the Swedish tax system is that public revenues are largely raised by progressive taxes on labor earnings, whereas capital earnings is taxed extra evenly.
“They (capital homeowners) can simply select insurance coverage packaging that protects their investments from earnings taxes. There aren’t any inheritance or reward taxes,” says Reichenberg Gustafsson. In her view, which means that significant private wealth creation in Sweden is sort of at all times achieved by the profitable exit of enormous companies.
A holistic view of the economic system and funding
For example, Handelshogskolan i Stockholm (Stockholm College of Economics), considered one of Sweden’s main enterprise colleges, gives an undergraduate course on wellbeing taught by Mikael Dahlen, Chair Professor on the Heart for Wellbeing, Welfare and Happiness. The middle created the Stockholm Happiness Index in November, calling it the “new GDP.” The aim is to determine welfare progress as a proper social aim of coverage making.
Angelica Lipps da Cruz, CEO of Inorbis, argued: “Happiness is actually vital in economics. How will you be optimistic in the course of a battle?”
Sweden is type to ladies
We really feel that the Swedish funding neighborhood is extra female-friendly than different markets. “Ladies are a key ingredient right here within the Nordics. They’re bringing a long-term, extra sustainable ‘feminine vitality’ to the funding ecosystem,” Lipps da Cruz mentioned.
A rising community of women-led funding teams like RadCap Ventures and Feminvest intention to extend ladies’s participation within the funding discipline. I’m an enormous admirer of KvinnoKapital, a neighborhood ladies’s networking group that helps ladies in wealth administration community, alternate experiences and encourage others to strengthen the place of ladies within the Nordic wealth administration business.
Will Stockholm’s dynamism, together with entry to capital and entrepreneurial alternatives, additionally result in extra IPOs and larger alternatives for girls?
Missing laborious knowledge to help my principle, the folks I interviewed had been skeptical. Nonetheless, the overall consensus is that Sweden’s funding tradition, social norms and help techniques are prone to contribute to the general high quality and depth of the expertise pool.
“From my perspective as a headhunter specializing in senior finance positions, and from my very own background in finance, Stockholm’s success displays a mix of structural components, considered one of which is the sturdy illustration of ladies in capital markets. I’ve seen how the Swedish ecosystem persistently produces a broad and deep expertise pool,” mentioned Maria Lindbom, proprietor and CEO of Lager & Companions.
Lindbom identified that long-term pondering, sturdy governance and excessive institutional belief are core traits of the market. “The truth that extra ladies are being promoted to decision-making roles is a pure final result of this atmosphere, somewhat than a coverage exception.”
So whereas ladies’s illustration is just not the rationale for Stockholm’s outperformance, it’s a important a part of a broader, well-functioning capital market ecosystem that pulls long-term capital and helps sustainable progress.
The system behind success
My key takeaway for cities and international locations hoping to emulate Stockholm’s success is easy however demanding. It is about constructing a deep funding tradition, designing establishments that help long-term participation, and embedding financial pondering past short-term outcomes. Capital markets typically replicate the techniques that maintain them. Within the case of Sweden, the proof means that the power of capital markets is carefully tied to techniques that help long-term financial savings, governance, and continuity throughout the cycle.
On a much less critical be aware, Stockholm’s fame should rely upon meatballs, but it surely’s additionally a helpful reminder. The very first thing an outsider notices isn’t what explains constant outcomes. The attraction lies not within the meals itself, however within the recipe. Once I go to Stockholm for a lecture, I nonetheless make time to take a stroll alongside Strandvegen or have fika at Fabrike. And when a giant occasion calls for prime efficiency, you go for Kettbler at Lodge Diplomat. They’re good, however like Stockholm’s capital markets, it is not their floor impressions that make them memorable, however their underlying care and construction.
