Danish pension funds are looking for alternative investments for better returns
Danish pension funds are looking for alternative investments for better returns at a time of low interest rates. PFA, Denmark’s largest commercial pension fund, will invest in infrastructure projects and unlisted companies.
The 622 billion crowns-worth Danish pension funds now want to invest in alternative investments for better returns. Danish investments rose to 289 billion Danish crowns ($45.8 billion) last year, indicating an increase of 14 per cent. This amounts to double such investment in the year 2012. It makes 10 per cent of the sector’s total assets, according to FSA, the industry body. The PFA has increased its investments in alternative assets to 60 billion crowns last year. This represented increase by 43 per cent last year. PFA not intends to triple its alternative assets in 3-4 years. It has hired five new experts and it has now seven experts for the purpose.
PFA has invested more than 100 million crowns in six British solar power plants and $100 million in the Interpark, largest U.S. parking lot operator.
“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.
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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.
Denmark will encourage more companies to list in Copenhagen and reduce the tax it levies on equity investments for the purpose.
He said that PFA’s size helps when searching for deals in the unlisted market.
“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 will invest up to 500 million crowns in the fund Copenhagen Infrastructure Partners II. Copenhagen Infrastructure Partners II generally invests in energy infrastructure assets.
It will also invest more than 1 billion crowns each in Global Infrastructure Partners and Antin Infrastructure Partners.
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