Dorothy in conversation with LPs #1

In the first of SuperReturn’s new series of interviews with LPs, Katja Salovaara, Senior Portfolio Manager Private Equity at Ilmarinen speaks to Dorothy Kelso, Global Head of SuperReturn, about how her career evolved, what inspires her, and the key factors that will shape the private equity industry.

Dorothy: Where did you start your career?

Katja: In London in the European investment team at Pantheon Ventures in the late 1990s. It was a true privilege to work there and learn from such experienced and great investors. I really appreciated the truly pioneering global lens that Pantheon had, with offices in the US, Europe and Asia from the outset.

I also had a private equity stint at the Shell UK pension fund before I suddenly had the opportunity of setting up private equity (PE) investing at Ilmarinen in January 2000, creating something new I truly believed in and moving back to my home country Finland. My London years are precious as they shaped the direction of my career; I made life-long friends and enjoyed every minute of it!

Dorothy: What do you enjoy most about your current role?

Katja: There are so many aspects of this job that I absolutely love. I learn every day. Our PE managers attract and retain such incredible talent, and are constantly evolving and investing in new areas. PE is often investing in the most dynamic parts of the economy, acting as change agent and embracing a culture of continuous improvement. It is all endlessly interesting to me.

The purpose of providing for people’s future income, hopes and dreams is hugely motivating to me and comes with great responsibility.  In my 20-year experience as an LP, I see PE as a force for good, building better businesses, allocating capital extremely well, acting as responsible owners and generating much needed returns for millions of beneficiaries around the world and thus providing benefits to society in multiple dimensions.

I tremendously enjoy the entrepreneurial aspect and effort; when I joined in 2000, Ilmarinen had less than 100 million invested compared to 3 billion today, and there have been significant distributions and returns to date. In the same way, I enjoyed setting up the co-investment activity in 2010, and that is now part and parcel of our investing. I love being involved in all the co-investments because I learn so much. It makes me a better fund investor.

What I like most about investing is that it’s part science and part art – it is a judgement business. There has been huge increase in data, but the judgement side will always remain at least as important as the data.

And finally, because the PE market is one with imperfect information and, therefore, an inefficient market, having proprietary insights gives us so much opportunity to make great returns and to outperform.

Dorothy: What do you do in your spare time?

Katja: I work too much of the time, but most importantly I do spend time with my family – my husband and three children. I also like running along the sea in Helsinki, or dancing off all the PE investment memos and excel models at a bailatino or Zumba class to some good music. I also like to read – at the moment I am reading Kazuo Ishiguro’s novels.

I ran my first marathon in 1991 as a university student. Women were not allowed to officially enter the Boston marathon until 1972 – yes, in America! Not for a second did I think that I couldn’t do it, and I finished in 3:35 hours. I am telling you this because I think it says something about precedent and role models; and part of the struggle for women in PE today is that they see so few role models in terms of women in Senior roles at PE firms.

Dorothy: What have you seen recently on Twitter that stood out?

Katja: All PE stand out in a way, as so few PE firms are yet on Twitter. I like following PE firms and picking up their news, and your tremendous SuperReturn social media content. I also thought the recently published report “Women in PE” by BVCA and Level 20 is excellent.

Dorothy: I love the plug for SuperReturn content, thank you Katja! On a final note, what trends are you seeing shaping the future of PE?

Katja: Success (i.e. performance) is driving continued growth of the industry. I think that the label “alternative” is becoming outdated, if it isn’t already. Many institutions have significant allocations and investment experience, and the returns are meaningful and extremely important to investors.  As Hiromichi Mizuno of Japan’s GPIF said recently, PE has become more mainstream than alternative; fewer than 7,000 companies are listed in the US, compared with nearly 8,000 companies owned and operated by private equity.

I think perception lags reality quite significantly, so the scale, implications and sophistication of modern PE is not well understood and too often oversimplified. It is often talked about like one uniform industry, whereas there is practically unlimited choice, strategies and approaches coming in many shapes and forms, and every LP can have their “own version” of PE.

As software is taking over the world, tech has become a much bigger part of the PE investment universe. Also, as companies are staying private much longer and can raise so much money in the private markets, the public markets are missing out on innovative growth companies – like the Googles of tomorrow. The number of listed companies has almost halved since 1995 in the US.  Although things will ebb and flow between the private and public markets, I do believe that private markets will continue to grow for many reasons, not least because of the active ownership model.

In recent years, the leadership at top private equity firms have also committed to making their firms more diverse, as diversity of thought will be good for future performance. I am excited about the future of PE – the best is yet to come.

Dorothy: It’s been a real pleasure speaking with you Katja, thank you.

---

Under the spotlight: Katja Salovaara

Katja has been a Senior PE Portfolio Manager at Ilmarinen since January 2000. Ilmarinen is mutual pension insurance company based in Helsinki, Finland, managing 46 billion euros and currently 6% is invested in PE. Before joining Ilmarinen, she worked at the Shell UK Pension Fund in London.