DENMARK -- AP Pension, the Danish occupational pension scheme, has channelled DKK130m (€17.4m) into an Asian property fund with a portfolio of shopping centres - its first direct foray into Asian real estate funds.
The pension scheme invested by means of a co-investment model with global fund Sparinvest Property Fund, which allowed it to benefit from the global fund's negotiating clout but also to tailor the investment, AP Pension said.
The Asian fund's holdings include six shopping centres in Japan, Malaysia and South Korea, including a six-story shopping centre in Kuala Lumpur with more than 300 shops.
A need for diversification was behind the move, said Peter Olsson, AP Pension's head of real estate investment.
"It is important to us to compose our property portfolio with a high degree of risk diversification, so that we don't become dependent on the economic development of a single region," he said. "So we are increasingly looking to supplement our Danish real estate investments with foreign investments," said Olsson.
AP Pension is among 11 institutional investors to have allocated a total of DKK3.6bn to the Sparinvest Property Fund. Up to now, the Sparinvest fund has invested in different property funds, of which three were Asian.
But it recently started offering co-investing to its investors, letting them to invest directly in funds, while reaping the benefits of Sparinvest's better negotiating position as a result of its increased volume.
"This cooperation is very advantageous for us," said Olsson. "We get the chance to tailor the distribution of investments between different regions, and at the same time, we benefit from the fundamental analysis work that Sparinvest has done."
AP Pension said the Asian property market was one of the most attractive this year, with a growth rate of 5-7%, supported by evidence of growing interest among institutional investors towards investing in the region, it said.
That said, officials recognise there are risks too as Sparinvest Property Investors' managing partner Bo Jensen said: "These markets are also more risky, and it is important to do your homework properly. We place great importance on local knowledge and on having an established organisation in the region."
The Asian fund in question is run by a manager with more than 10 years of experience in the region and eight local offices in the individual countries, Jensen added.
In the next few years, AP Pension said it expected to make further investments in Asia, but will also invest in Denmark and elsewhere in Europe. While its strategy in Denmark is to invest directly in properties, the pattern abroad remains one of investing via funds of funds or directly in property funds, it said.
Property investment accounts for just under 10% of AP Pension's DKK30bn in assets under management.
In the last few years, AP Pension has sold residential properties and concentrated on commercial properties. The scheme started investing in foreign properties last year, and expects to boost real estate investment in the next few years, both in domestic and foreign projects, it said.
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