IPE Nordic Briefing: Danish pension funds keen to invest in defence sector

Danish pension funds have proved keen to invest in the defence sector, on home turf as well as in Europe more widely, in line with the government’s commitment to bolster the Nordic nation’s military capabilities in the face of a more belligerent Russia.

PensionDanmark has been part of two high-profile defence investments made public lately. A consortium led by the DKK376bn (€50.3bn) pension fund won a public-private partnership contract to build new army barracks in Denmark – trumping rival bids including one from a consortium comprising other pension funds, including IndustriensPension, AP Pension and AkademikerPension.

Then late on Sunday, PensionDanmark was revealed as the main investor in a €220m anchoring by pension funds of the new buyout-focused private equity fund ETNA – alongside AP Pension and AkademikerPension – which will target European investments in the defence industry, cybersecurity and protection of critical infrastructure.

PensionDanmark’s head of equities, Erik Bennike, told participants at last week’s IPE Conference & Awards in Seville that he sees much potential for pension funds to invest alongside the public sector. “But of course it requires that both the public and the private side are open to having a dialogue about how the risk can be shared,” he added.

In Norway, there is much focus on how the sovereign wealth fund can maximise returns from its NOK21trn (€1.8trn) of assets – given it is essentially an index-tracker. Norges Bank Investment Management (NBIM), which manages the Government Pension Fund Global (GPFG), homed in on the problem of underperformance of its real estate investments in a letter to the finance ministry last month, and revealed a shift in its property investment strategy to address that, ahead of the general publication of its new multi-year strategy plan yesterday.

Earlier this week, a government-commissioned expert report was released, which contained detailed independent scrutiny of NBIM’s active management. While lauding the “substantial value for the Norwegian people” such management had produced, the report’s authors, Trond Døskeland and André Wattø Sjuve of NHH Norwegian School of Economics in Bergen, criticised “top-down allocation decisions”, which – particularly in the last four years – had reduced overall returns.

Items to note:

• Iceland’s minister of finance and economic affairs talked at a seminar in Reykjavik last week about the background to the government’s pension fund bill, which includes a move to the prudent person principle for investment.
• IPE’s Nov/Dec magazine contains in-depth coverage of Nordic pensions, including features on tensions around Sweden’s AP funds mergers; the Norwegian TV documentary series around NBIM, and an exit interview with Timo Löyttyniemi ahead of his retirement as CEO of VER, the State Pension Fund of Finland.

Rachel Fixsen

Nordic Correspondent