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Leading Danish pension fund to keep faith in alternative investments
August 25, 2017 / 10:06 AM / a month ago

Leading Danish pension fund to keep faith in alternative investments

* Pension funds have looked further afield to boost returns

* PFA continues to target infrastructure, unlisted companies

By Teis Jensen

COPENHAGEN, Aug 25 (Reuters) - Denmark’s largest commercial pension fund, PFA, plans to keep investing in assets such as infrastructure projects and unlisted companies even once bond yields start to recover.

Danish pension funds have stepped up such “alternative investments” in recent years in search of better returns at a time of ultra-low interest rates.

Last year total alternative investments rose 14 percent to 289 billion Danish crowns ($45.8 billion), almost double what they were in 2012, and making up more than 10 percent of the sector’s total assets, according to industry body the FSA.

PFA, which handles pensions savings for 1.2 million of Denmark’s 5.7 million population, increased its own investments in alternative assets by 43 percent to 60 billion crowns last year.

“Now that we’ve built up our skills in the unlisted market, I believe we’ll continue to look at the opportunities in that part of the market,” PFA’s chief financial officer Anders Damgaard told Reuters.

Damgaard said that once the major central banks stop “vacuum cleaning” the market for new bond issues, it would ease the downward pressure on bond yields, making such investments more attractive in comparison with alternatives.

That means that PFA would need to be look more carefully at the yields on offer from a wider variety of options.

“Each investment must compete with what can be done in the listed market, and the more attractive that becomes, the more we’ll move in that direction,” he said.

PFA has invested more than 100 million crowns in six British solar power plants and $100 million in the largest U.S. parking lot operator Interpark.

PFA, which holds total assets worth 622 billion crowns, wants to hold on to expertise it has build up in areas that are more complex than traditional stocks and bonds.

Denmark also wants to reduce the tax it levies on equity investments to encourage more companies to list in Copenhagen, its business minister told Reuters this week.

PFA said in March it aimed to triple its alternative assets in 3-4 years, and had hired five new specialists, so that it had seven specialists to the manage the area.

PFA’s size helps when searching for deals in the unlisted market, he said, giving the recent $100 million investment in Interpark as an example.

“That investment is so big, so that there are just few investors in the world that can bid on it. It means you’re not in competition with everybody,” he said.

PFA has pledged to invest up to 500 million crowns in the fund Copenhagen Infrastructure Partners II, where other large Danish investors are also involved. That group is focused largely on energy infrastructure assets.

It has also committed itself to investing in the funds Global Infrastructure Partners and Antin Infrastructure Partners. It plans to invest more than 1 billion crowns in each of the two funds. ($1 = 6.3050 Danish crowns) (Reporting by Teis Jensen; Editing by Jacob Gronholt-Pedersen/Keith Weir)

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