To bring diversification into ATP’s overall investment portfolio, approximately 4.3% has been invested in property – equivalent to €1.4bn. The strategic goal is to reach a 5% allocation (+/– 3 percentage points) in property by the end of 2003.
Until the beginning of 2002, ATP invested solely in Danish real estate. However, reviewing its strategy the fund decided to expand the boundaries for property investments and to add European exposure to the portfolio.
Consequently, ATP is aiming to have a 30/70 split between international and domestic property investments by the end of 2005. Gradually this split will be equalised and eventually show a predominance towards international property allocations.
At present €1.2bn has been invested in Denmark and €200m in the rest of Europe.

Focus on intern ational investments
While all property investments are made directly in Denmark and managed 100% in-house, the ATP strategy differs a great deal when it comes to international property investments. Outside Denmark all investments are made indirectly through non-listed real estate vehicles. Building up this new international portfolio was the top priority within ATP’s property team in 2002 and 2003.
The fund intends to build up a diversified international portfolio of 20 closed-ended property funds before the end of 2005. The target is a commitment of approximately €550m by that time. By co-operating with fund managers with specific sector or country knowledge, ATP believes it will get access to the best local real estate knowledge throughout Europe.
All investments are made in accordance with a ‘core-satellite’ strategy, the target being a total geared return of 10–12%. The majority of the portfolio is invested in the most mature and least risky markets and then supplemented with investments in less developed markets with a higher risk/return ratio. Diversification is a number one priority, which the fund does its utmost to achieve on five levels:
q Variety of geographic regions
q Sector spread
q Selection of different fund managers
q Exposure to different investment styles: core, core+ and opportunistic
q Diversified timing of entry into the different regions and sectors
Prior to selecting a fund for investment ATP completes a thorough due diligence process with assistance from its advisers.

Status of ATP’s international strategy
In 2002 and 2003 ATP met its investment target for the international property strategy. ATP invested in a total of seven funds with an aggregated commitment of €191m. These funds were well diversified within the three investment styles: core, core+ and opportunistic.
The property funds typically make their investments over a two- to three-year time span, matching its request for a diversified market entry within the various sectors. To date, €76m or 40% of the committed amount has been invested in approximately 300 properties.
The fund prioritised an investment focus in the logistics segment and consequently focused less on the office segment.
The belief was that in times of economic uncertainty, such as has been experienced over the past years, the logistics segment offers the most stable total return. However, ATP says it will be monitoring the office markets closely in the years ahead to anticipate a potential rebound of this real estate sector.
In terms of geography, the fund has deliberately been less focused on Germany and the London region. On the contrary, ATP says it has found the Central European region to represent interesting investment opportunities and, as a result, has committed to a fund in that region. According to ATP, the Central European property market is still maturing, giving potential for further growth and hopefully additional yield compression.

Maturing non-listed industry
ATP believes that the non-listed real estate market will continue to grow in the years to come. The fund has played an active role in the establishment of the association for Investors in Non-listed Real Estate vehicles (INREV).
Together with INREV, ATP says it will continue to push the industry forward and encourage standardised reporting criteria as well as a benchmark for these types of investment vehicles. The scheme believes that non-listed vehicles will play an increasingly important role in an international property portfolio to the mutual benefit of investors, fund managers and advisers.