Denmark’s pension funds are cooperating via their industry association on a project to give consumers and others more clarity about when and how they re-value their alternative assets, the association has revealed.
Insurance & Pension Denmark (IPD) announced yesterday that it was working with pension fund members to create a model for industry guidelines aimed at achieving more transparency in the way the providers repriced the unlisted assets in their portfolios.
Jan Hansen, deputy CEO of the industry association, said: “We want to ensure consumers as much clarity about the alternative investments as possible.”
According to IPD, the work aims to make two points clearer – firstly, under what market conditions each pension company reprices its unlisted assets, and secondly, how the firms do such revaluations.
IPD said that alternative investments – unlisted assets – provided high, stable returns and made up an increasing share of the pension industry’s investments, but that no unambiguous rules existed for how the value of these assets was calculated and when it should be adjusted.
It said a working group at IPD was now looking at whether more uniform guidelines and increased transparency could be created.
The association said it was clearly in the interest of consumers that a certain part of their savings was invested in unlisted assets, which varied widely from offshore and onshore wind farms for energy supply to roads, ports and airports, properties and more.
“It is not possible to set clear rules for how unlisted assets are to be valued,” Hansen said.
“There are many different asset types, risk profiles and investment structures. Instead, pension companies have to continuously value on the basis of changes in market conditions or other conditions around the individual investment,” he said.
Ultimately, Hansen said, it was the management of the individual companies that was responsible for the valuation. “The legislation is very clear on that point,” he said.
The project is expected to be completed in the spring of 2021, IPD said.
Alternatives valuation is a topic the Danish FSA has focused on particularly in the last few years.
In June, the financial watchdog said it was beginning an investigation into the pension sector’s ongoing valuation of alternative investments, after the funds suffered investment losses in other asset classes because of the effects of the COVID-19 pandemic.