DENMARK - PensionDanmark will boost its investment in infrastructure and utilities over the next few years, in a strategic bid to compensate for weak bond yields, the fund has confirmed in its annual report.
The fund, which covers employees in sectors including transport, construction and hotels, said in its 2006 annual report that it was creating a new asset class in its 2007 strategic benchmark.
This ‘other assets' class would contain investments in different types of infrastructure, particularly in the field of transport, as well as investments in water and gas supply installations.
As well as these investments, the category will also include different kinds of so-called market-neutral credit and hedge funds, which aim to deliver a stable return regardless of developments on the stock and bond markets, the fund said in its report.
"In 2007, the aim is for the "other assets" group to make up 4% of the whole portfolio, but in 4-5 years' time, it is expected that the weighting will rise to 8-10%," the fund said.
"Because of the current low level of interest rates, it is particularly attractive to supplement bond investments with the type of investment that can be expected to give a higher return than bonds in general, and at the same time will help spread risk," the report continued.
PensionDanmark confirmed that it achieved an investment return of 7.0% in 2006, which was 0.4% higher than the strategic benchmark. Assets rose to DKK61.9bn (€8.3bn) in 2006 from DKK52.2bn (€7.0bn) the year before.
"2006 was yet another good year with considerable growth in premiums, members, assets under management and a continuing strong consolidation," said CEO Torben Möger Pedersen.
Administration costs had been cut for the fourth year in a row, he pointed out, even though there had been increased activity and continuous product development. Costs dropped to DKK318 (€43) per member from DKK320 (€43) in 2005, he added.
"This reinforces PensionDanmark's position as the most cost efficient pension provider in the business. In the end low administrative costs will result in higher old age pensions for the members," Pedersen continued.