EUROPE - Labour-market scheme PensionDanmark is to invest an extra DKK220m (€29.5m) in the country's new government-backed venture capital fund, saying the fund's investment model is a good one.
In January, the Danish government agreed with the pensions sector to put a total of DKK5bn into the newly created fund, Dansk Vækstkapital, which would make capital available for entrepreneurs and small and medium-sized growth companies.
Torben Möger Pedersen, managing director of PensionDanmark, said: "Danish employment and growth is dependent on successful entrepreneurs and positive development among the many small and medium-sized businesses in Danish business life.
"It is important for them to have access to venture capital, so we are ready to invest an extra DKK220m in these businesses."
Dansk Vækstkapital undertakes investments in small and mid-cap funds, venture capital funds and funds offering subordinated loan capital.
"A good model has been found, which raises the supply of venture capital for the benefit of entrepreneurs and small businesses, while at the same time giving us the prospect of a good return for members on our investment," Möger Pedersen said.
Right now, PensionDanmark said it had loans to large companies of DKK6bn. Including this latest commitment to Dansk Vækstkapital, it has invested more than DKK5bn in private equity funds.
In other news, commercial pensions and insurance company Topdanmark is issuing DKK400m (€53.6m) in subordinated loan capital to boost its capital ahead of the Solvency II deadline in 2013.
According to Topdanmark, the fresh funds are being raised as a precaution and will only be necessary if the Danish regulator does not accept the company's use of its own internal solvency model.
The company said: "If the Danish Financial Supervisory Authority (DFSA) approves that Topdanmark Forsikring uses an internal model to calculate insurance risks under Solvency II, it is expected that the required size of the solvency capital of Topdanmark Forsikring will be DKK600m-800m lower than if the DFSA requires that the so-called standard model be used.
"Topdanmark expects that its internal model will be approved, but wishes to ensure sufficient solvency capital, in good time, by 2013 if the internal model is not approved in time."
The subordinated notes will be issued on 24 June, with a total nominal value of DKK400m. There was significant demand for the issue of DKK350m that was subscribed last week, and this generated a further issue of the notes yesterday, Topdanmark said.
The notes carry a coupon of 6.6% for each of the first five years and then give interest equivalent to three-month Cibor plus 5.25% until 2019. The subordinated loan has been arranged by Nykredit Bank.
Topdanmark had DKK57bn in assets under management at the end of 2010.
Finally, investing in agricultural land is set to become extremely interesting for pension funds from a strategic point of view, according to the managing director of Denmark's AP Pension, but he said the time was not yet right to buy Danish farmland.
AP Pension managing director Søren Dal Thomsen said: "Purely strategically, it will be highly interesting for a pension fund such as AP Pension to invest in agricultural land."
A change in the law governing agriculture has opened up the possibility for external investors to buy Danish farm businesses, the pension fund said.
But right now it was not realistic to buy up land in Denmark, Dal Thomsen said.
"Prices for Danish farmland are too high," he said. "But prices will fall, and when one day they hit the level they are actually worth, it will be appropriate for us to invest. If we do, we will have a return of 5% plus inflation protection."
Dal Thomsen was responding to a new analysis on the investment sector by Danish financial services group Nykredit.
According to the report, the current price for farmland in Denmark would lead to a return of around 3.25% for an investor putting DKK10bn into a purchase of 67,000 hectares of land.