How we invest

Proventus’ independence helps us avoid preconceptions in our search for investment opportunities. We are not limited to specific phases of a company’s development, to a list of pre-defined industries or to any given formula for an investment structure. We see ourselves as problem solvers and tailor the type of capital and level of activity we offer to the specific needs of a situation.

We look for potential investment opportunities to provide development capital through investments in public corporate bonds, leveraged loans and private corporate loans to mid-sized companies in need for growth and restructuring capital. The latter category includes companies that are performing well, but which have the potential to develop further with added capital and some guidance in situations involving organic expansion, acquisition, refinancing or generational succession. We employ the same analytical framework on our investments in public corporate bonds and leverages loans. Investments are carried out primarily in the Nordic region, Western Europe and in the US.

Along with our principal investment direction, Proventus continues to contribute to the development of its equity holdings. Proventus is the principal shareholder of the Swedish toy company BRIO, Artek, the company that markets the furniture and designs of Alvar Aalto, and Tom Dixon, a contemporary furniture and interiors brand.

In addition to our investment activities, a proportion of our capital is invested in our own asset management operation, primarily in tradable securities and derivatives.

Proventus has in the past ten years moved to meet what we believe to be an important, unfilled need among mid-size European companies that are in expansion or restructuring, but are unable to acquire bank financing and unwilling to dilute current ownership to fund such initiatives. In September 2009, Proventus laid the ground for Proventus Capital Partners a co-investment vehicle through which Proventus invests its own and external funds in public corporate bonds, leveraged loans and private corporate loans to mid-sized companies in need for growth and restructuring capital. 

We see this as a major investment opportunity, targeting capital needs that cannot currently be financed because of restrictive loan policies of banks and others. We think there is a significant need for a more active market of this kind and aim to take part in developing it.

Our ambition is to grow into that gap in the market, by becoming a problem solver for those mid-size companies in need of capital. We don’t have a single formula for our relationships with potential borrowers, but will try to find the right mix of active participation and capital structure for each individual case. What is important to us is keeping a close working relationship with management and owners, so that we can anticipate changing needs as they may arise.

Proventus looks for partnerships with the owners of the companies that we lend to. In contrast to those investments in which we take an active role in a well defined process of change, we look for companies with a good cash flow generation capacity, and in less challenging circumstances, that are well run, and are looking for funds for e.g. expansion and restructuring. Unlike most lenders, Proventus’ experience in change management gives us the know how to become active partners should the need arise in the case of financial targets not being met.

The European market for corporate bonds a few years ago was just one fifth of what it is in the US, but after the financial crisis, beginning in 2007, it has grown tremendously. Proventus has invested in public European corporate bonds since the late 1990s and we believe that by analysing the individual business situation of the borrowers, using the same framework as we would employ in an equity situation, we can identify high-yield corporate bonds with lower risk of default, and substantially higher recovery rates than the high-yield market in general.  We also believe that we can add value in case of bond defaults, not necessarily by being a substantial investor in terms of size, but by having the right ideas about what can be achieved.

The majority of Proventus’ investments historically have been via active investments in companies that have a need for change and would benefit from an active investor with a longer term perspective – typically restructuring or turnarounds of underperforming companies facing the dual problems of structural inefficiency and lack of innovation. As shareholders we have been part of an extensive list of successful company transformations. Apart from capital, Proventus brings an expertise in change management drawing on our own resources as well as an extensive network of specialists to aid the company transformation in a variety of ways. Along with its principal focus on development capital, Proventus continues to contribute to the development of its equity holdings. Current active investments include BRIO, Artek and Tom Dixon.

As a private company we need sufficient financial liquidity and resources to be able to meet demands and opportunities from our development plans as they arise over time. That means investing a proportion of our funds in a liquid, lower risk way. And that also gives us the scope to use our capital to take advantage of fundamental mispricings, be they in currencies, in stock markets or in commodities.

Our investments in the asset management operation are in tradable securities and derivatives with sufficient liquidity. The investment strategies are mostly long-term, and are based on an analysis of investment fundamentals building on the same macro view that informs our other activities.

Proventus are generalists in an investment world where most people specialise. Proventus' investments range from very complex financial instruments, to more basic schemes. Our underlying approach is not to follow the market but to act on our own conviction and analysis. We are always ready to invest where others don’t.