Danish pension fund manager PKA revealed today it invested $1bn (€945m) earlier this year in a new sustainable swaps product offered by investment manager Osmosis.

The news came this morning as part of Osmosis Investment Management’s launch of the product – a total return swaps (TRS) programme on its Resource Efficient Core Equity Index that it had created following consultation with clients.

Michael Nellemann Pedersen, chief investment officer of PKA in Copenhagen, said: “We are delighted to extend the environmental aspect that is characteristic of PKA’s equity strategy to our swaps exposure.

“In this way, we can continue to take advantage of the Osmosis Resource Efficiency investment thesis which combines significant environmental savings with targeting better returns through an objective data-driven approach that will help support the pensions of our members,” he said.

JP Morgan acted as a counterparty to this first trade of the TRS programme.

In July 2022, PKA invested DKK5bn (€672m) in Osmosis’s Resource Efficient Global Core Equity strategy, which the asset management firm says is 58% more “resource efficient” than the MSCI.

Osmosis said that core strategy now had more than $12bn under management.

Commenting on its decision to offer the new swaps product, Osmosis said offering the ability to gain access to this index via swaps filled an important gap in the market, and was “a logical next step for large pension funds seeking to manage their cash exposure while benefitting from a sustainable source of return”.

TRSs were a very flexible risk management and return-shaping instrument, it said, which large institutions often use to manage cash and synthetic exposures.

“While their use has greatly increased in recent years, larger customised portfolios have historically allocated their TRS exposure across vanilla (non-sustainable) indices,” Osmosis said.

“Our swaps solution provides our investors the opportunity to broaden their exposure to our sustainable investment programmes,” said Ben Dear, Osmosis’s chief executive officer.

February saw a big pension fund win for Osmosis with the €28bn Dutch multi-sector pension scheme Pensioenfonds PGB awarding it a  passive €4.5bn ESG global equity mandate.

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