Industriens Pension, the Danish labour-market fund for the industrial sector, plans to treble direct investment in property and infrastructure over the next 2-3 years, pumping an extra DKK7bn (€938m) into these asset classes.
The pension fund, which has DKK134bn in investment assets overall and around 400,000 members, said it now had almost DKK29bn, or 21% of assets, in alternatives.
Jan Østergaard, investment director at Industriens, said: “We expect to treble direct investments in property and infrastructure in the next few years.”
He said the time frame for this increase was 2-3 years.
At the moment, direct investments in property total around DKK2bn, and direct infrastructure investments come to about DKK1.5bn.
“At a time when interest rates are on the floor, and there is uncertainty on the financial markets, these types of investments provide stability, which is absolutely critical when you are dealing with pension savings,” Østergaard said.
“In the course of the next few years, we expect to increase Danish property investment to around DKK5bn.”
Industriens said its alternative investments included real estate, private equity, infrastructure funds, wind turbines and investments via public/private partnerships (PPPs), along with other assets.
Østergaard said there were some attractive investment opportunities within alternatives, and that, because of this, the pension fund had been building up its skills within the investment department in this sector.
“It has become an important supplement to traditional equities and bonds and is key to our ability to generate some solid returns for our members,” he said.
The current record-low level of interest rates has been a major factor in putting alternatives firmly on the agenda for pension funds, Industriens said.
Because interest rates have been low for so long, it added, it has become necessary to invest in other assets that have some of the same characteristics bonds traditionally had – low levels of risk and a stable return.
Østergaard said the pension fund saw investment in projects that benefit Danes directly positively, such as PPP projects to build hospitals.
The fund cited its investment alongside other institutional investors in hospitals in Næstved and Slagelse.
At the end of August, four Danish pension funds invested DKK520m in a hospital building project in Slagelse in west Zealand.
“But of course,” Østergaard said, “that has to be combined with our earning a proper return, and being involved with good partners, as was the case with Region Sjælland (the municipality of Zealand), where the two hospitals are located.”