STOCKHOLM-Two of Sweden’s state-owned pension funds, the First and Second Swedish National Pension Funds (AP1, AP2) are forming a joint venture with property advisor Catella to target $700 million in equity at European real estate, mainly outside the Nordic region. Former Aberdeen Property CEO Rickard Backlund has been appointed to chair the new company.

The business strategy is to invest in commercial real estate, focusing on office centrally located in major European cities, the funds said. The firm will enable both to, “establish long-term ownership of real estate on the most significant European markets.” The two funds will be joint 50-50 owners of the investment JV and have signed an agreement with Catella for support in resources, competence and expertise during the build-up phase. Alongside Backlund, a search has been launched for a CEO and other board members.

AP1 and AP2 are among five buffer funds in the Swedish national pension system, committed to “investing to maximum benefit and generating a high return at low risk over the long term.” At year-end 2010, the two managed total pension assets of $69 billion.