Danish pensions provider PKA has said it remains very focused on alternative investments despite the losses on its private equity investment in tyre-recycling company Genan, and plans to boost alternatives to one-quarter of overall assets within a few years.
The DKK215bn (€28.8bn) provider, which manages three labour-market pension funds in the health and social care sectors, said Genan and its collapse last year should not be taken as a general example of alternative investments going wrong.
Peter Damgaard Jensen, chief executive at PKA, said: “Alternative investments make us more resilient when and if a new economic crisis comes.”
When equities markets fall, for example, many alternative investments will be affected far less, he said, because they are tied up in long-term agreements lasting several years for offshore wind turbines or in fixed leases for properties.
He said he resented that Genan was often held out as an example of how wrong things can go when the pensions sector takes on alternative investments.
“Genan is in many ways a unique case,” Damgaard Jensen said.
“The business and the jobs were saved because both PKA and the banks saw the potential in the company.”
PKA said back in February that it secured a rescue deal with bank creditors for Genan and put Peter Thorsen in place as chairman.
PKA admitted it lost money on the investment in Genan and said the facts were now being investigated by financial investigators.
Genan collapsed in the summer of 2014, and PKA then took over 97% of the company’s shares.
In April 2015, the operating companies were brought together under a new holding company to provide a clear and simple structure, PKA said.
On 1 September, Poul Steen Rasmussen took over as Genan’s chief executive.
Genan is now developing positively and has re-established many good relationships in the industry, Damgaard Jensen said.
“A lot of positive things have happened with Genan in a relatively short space of time, but it is clear there is a long way to go before Genan produces the returns we expect from the business idea,” he added.
He said PKA had a sharp focus on alternative investments and that this covered everything from private equity, property, wind farms and infrastructure – mainly via investment funds.
“We have reaped a very good return from alternative investments, with a return of 7.2% in the last five years,” he said.
“Because of this, we now have around 23% of total assets placed in this type of investment.”
He said this percentage would rise to 25% within a few years.