Jonas Nyquist, head of alternatives at Sweden's Alecta, a pension fund managing €126.7 billion, highlights a shift in how Limited Partners (LPs) evaluate private equity managers. While distributed to paid-in (DPI) ratios remain important, Nyquist emphasizes that purchase multiples are emerging as a critical metric. This focus on disciplined entry pricing directly links to a manager's ability to create value over the investment lifecycle.

Nyquist suggests that LPs are increasingly scrutinizing whether fund managers overpay for assets. This scrutiny is becoming a standard part of their due diligence toolkit. The pension fund, holding SKr1.4 trillion in assets, is prioritizing this approach as a way to ensure robust returns and responsible capital deployment within its alternatives portfolio.

The emphasis on purchase multiples signifies a move towards a more granular understanding of value creation, moving beyond solely backward-looking performance metrics. It implies that LPs are looking for managers who can consistently acquire assets at attractive valuations, setting the stage for successful exits and strong DPI figures in the future. This strategic shift by Alecta could influence broader LP sentiment and manager selection criteria across the industry.