DENMARK – The five pension funds run by Danish pensions administrator PKA have been told by the regulator that their property portfolios are overvalued.

Following a regular inspection of the pension funds, the Danish FSA told each pension fund: "The FSA has found that the pension fund's real estate portfolio generally are valued highly in comparison to other life insurance companies' real estate portfolios."

It gave each of them a risk notification to the effect that the boards should report back with valuations of their real estate portfolios at market prices.

This is not the first time the Danish regulator has censured pension funds over property valuations.

In early April, it instructed Pensionskassen for Teknikum og Diplomingeniører – the DKK15.1bn industry-wide pension fund for technical and BSc engineers – to cut valuations on a substantial portion of its property portfolio.

The five pension funds run by PKA are the Office Staff Pension Fund (Pensionskassen for Kontorpersonale), the Medical Secretaries' Pension Fund (Pensionskassen for Lægesekretærer), the Social Workers and Social Education Practitioners' Pension Fund (Pensionskassen for Socialrådgivere og Socialpædagoger) the State Registered Nurses' Pension Fund (Pensionskassen for Sygeplejersker) and the Healthcare Professionals' Pension Fund (Pensionskassen for Sundhedsfaglige).

The FSA also gave each of the funds an order to improve key sensitivity analysis in determining the ICAAP (Internal Capital Adequacy Assessment Process), saying the boards were not active enough in the ICAAP work.

The funds were also told by the regulator that their guidelines on credit risk to counterparties for liquidity and contracts with derivative financial instruments were insufficient.

PKA said the inspection had gone well, and that the regulator had confirmed the funds were well managed with a good capital base.

Regarding the directions given by the regulator to the funds, PKA said: "Steps have already been taken to implement the changes that are necessary to respond to the FSA reactions."