Three of Denmark’s biggest pension funds are linking up with the country’s largest bank to put DKK1bn (€134m) into a new fund to invest in domestic small and medium-sized enterprises (SMEs) by offering much-needed subordinate loan capital.
ATP, PensionDanmark and Danica Pension, together with Danske Bank – Danica’s parent – are setting up the new fund, with the three pension funds furnishing it with initial capital of at least DKK1bn.
Danish SMEs will be able to apply for the funds in the form of subordinate loan capital, the parties announced.
ATP’s chief executive Carsten Stendevad said: “The fund is the expression of a new and exciting form of cooperation in the Danish financial sector.”
Danske Bank’s managing director Thomas Borgen described the fund as a completely new loan product that combined the bank’s, as well as the pension industry’s, skills and capital strength, and one that was also commercially interesting for the parties behind it.
“Denmark is dependent on positive development among small and medium-sized companies,” he said, adding that the pension funds and the bank wanted to contribute to increasing growth and resilience in Danish business.
The new fund will target businesses with more than DKK50m in annual turnover in need of loans of DKK10m-plus, the parties said.
It will be run by Capital Four, with the capital administration company also providing independent credit evaluation.
The fund was expected to be in place and ready for launch at the end of the summer, the parties said.
Other pension funds will be invited to take part in the fund.
Danish pension funds have pledged to the country’s government to promote lending to SMEs, with this promise made part of the deal in 2012 under which the alternative yield curve used to calculate pension fund liabilities would be extended.
The alternative yield curve eased problems the funds were having first with yield differential between Danish and German government bonds, and then with very low interest rates.
In December, Danica Pension announced it was investing DKK1bn in the GRO Fund, which would offer subordinated capital and equity for expansion to SMEs.
PFA, the country’s largest commercial pension provider, increased its investment in SMEs in Denmark in April last year by raising its stake in private equity firm Kirk & Thoresen Invest.