Danish labour market pension fund Sampension is to put more money into alternatives including real estate over the next five years, boosting the allocation to between 20% and 25% of total assets, and is hiring four extra people on its alternatives team.
Reporting interim results, chief executive Hasse Jørgensen said: “We will have the skills to deliver high stable returns for customers over the coming years.”
In order to make this happen, the pension fund was preparing its alternative investments team, along with other other parts of the organisation.
Jørgensen told IPE Sampension was adding four new staff to its alternatives team, and two of these were already in place.
Over the next five years, the pension fund would invest DKK15bn (€2bn) in alternatives, he said, which would bring the allocation — including real estate — to between 20% and 25% from just under 20% now.
Some of this DKK15bn would come from new money, and some would be re-investment from other areas, such as private equity investment funds that had matured, he said.
“We are giving alternatives a higher priority,” Jørgensen said.
In its first half results, Sampension reported a loss of 0.7% for traditional with-profits pensions before pensions tax, after a 10.9% profit in the same period last year.
Even though the investment portfolio had generated a 2.2% return in the period, the hedging portfolio ended in June with a 3.8% loss as a result of higher long-term bond yields.
Sam pension’s business income rose, with pension contributions up 3.2% compared with the same period last year to stand at DKK4.0bn at the end of June.
The pension fund said the addition of the new pension fund for IT group KMD at the beginning of this year had helped to reverse the trend in falling contributions.
However, Jørgensen said that structurally, Sampension was facing falling levels of contributions as its membership aged and moved into retirement.
“This is a very long-term issue, but it has made us start thinking and take some action in order to at least maintain the critical mass we have at the moment,” he said.
“We have been moving into the area of corporate pensions and won some bids there, and we are going to continue to do that in order to keep up our premium income,” he said.
Mergers were also a possibility, he said.
The most obvious candidates for partners would be smaller pension funds, of which there were many in Denmark he said.
These funds were finding conditions difficult, especially with the implementation of Solvency II regulations coming up next year, he said.
“We would expect to be able to help a number of smaller pension funds, but obviously that is their decision,” Jørgensen said.
Sampension’s total assets decreased to DKK255bn by the end of June from DKK257bn at the end of December 2014.
Its solvency, meanwhile, rose to 309% from 270%, according to interim data.