Danish pension funds PFA and Industriens Pension are joining forces to invest DKK1bn (€135m) in residential property in Denmark’s “growth cities” outside of Copenhagen and Aarhus.

The money will be invested via a new investment fund set up by privately-held property firm Thylander Group, called Danske Boligejendomme (Danish Residential Properties), the pension funds said.

Peter Frische, head of real estate at Industriens Pension said: “This is going to be an investment with low risk, that will be able to give a stable, attractive return for our members.”

PFA and Industriens Pension will each have a 49.5% stake in the fund and Thylander Group will own the remaining 1%.

Michael Bruhn, director of PFA Ejendomme (PFA Real Estate), said the fund would build up a portfolio of residential properties in selected cities and towns outside the capital, Copenhagen. Cities such as Odense and Aalborg were identified as being growth areas, with regard to the expected development of “megatrends” and demographics.

“In this way, we are involved in supporting a varied housing stock with attractive rental homes in the cities, and it is a good source of return for our customers at the same time,” Bruhn said.

The Danish capital Copenhagen, and the country’s second largest city Aarhus, have attracted the lion’s share of interest from property investors in the last few years of the booming real estate market, but PFA and Industriens Pension cite research commissioned by Thylander Group to argue the case for investing outside these two urban centres.

According to the new study from the Copenhagen Institute for Futures Studies (Instituttet for Fremtidsforskning), there are 29 Danish cities and towns – besides Copenhagen and Aarhus – that are experiencing population growth and need more homes of different types.

The newly-established fund will invest the DKK1bn that the pension funds are committing by 2019, Industriens Pension said.

The two funds manage total assets of DKK607bn and DKK150bn respectively.