Danica Pension to increase alternatives investment by nearly €2bn
DENMARK - Danica Pension plans to boost investment in alternatives by around DKK14bn (€1.9bn) over the next few years and expects the asset class to return between 6% and 8% a year.
The Danske-owned pension provider said government bonds were no longer able to deliver reasonable returns.
Peter Lindegaard, investment director at Danica, said: "We have already invested DKK6bn in alternative investments, and, in the coming years, that figure will reach around DKK20bn.
"Among other things, we will invest in infrastructure, wind turbines and unlisted small and medium-sized companies. We invest globally, but Danish business will also benefit from our investments."
The additional alternative investment will go into both the unit-link pension product Danica Balance and the with-profits product Danica Traditionel, the company said.
Danica said the current level of interest rates had not made the task of achieving a good return for customers any easier.
"Previously, government bonds were able to deliver a reasonable return, largely with no risk," said Lindegaard.
"It is not like that any more. If you invest in safe government bonds - Danish, for example - then you get a negative real return today. Your money simply becomes worth less."
Danica Pension expects a return of 6-8% a year on its alternative investments, he said.
"And at the same time, we expect the return to be more stable than what we have had on the stock market in the last few years," he said.
However, he said it was important to realise that this type of investment did not become profitable "in the course of an afternoon".
"With alternative investments, we are talking about a long investment horizon," he said.
At the end of 2011, the Danica Pension group had total assets of DKK303bn.