Denmark wants greater ‘oversight’ of pensions’ alternatives

The Danish government has vowed to increase the oversight of the country’s pension funds’ investments in alternatives, citing the asset class’s riskier nature.

The government is proposing to bolster Finanstilsynet, Denmark’s financial regulatory authority, with a further DKr2 million ($286,900; €269,000) per year to help fund its new efforts. The business ministry said further details surrounding the controls and funding would be submitted to parliament soon.

Denmark’s government noted the increasing number of pension funds making forays into alternative investments and said there is now a need for this to be monitored so they are “done in a proper way”. It identified alternative investments as “typically more complex and risky” than traditional investments.

Danish pension funds are particularly active in the infrastructure market and last month DIP, PensionDanmark and Lægernes Pension helped form a group of anchor investors in Copenhagen Infrastructure Partners’ third energy vehicle which reached a Dkr8.8 billion first close. PKA, one of the country’s largest pension funds, has made several direct investments in offshore wind and biomass projects, including the 288MW Butendiek wind farm which it sold in December three years after its initial investment, reaping an annual return of 25 percent.

“PKA has a good relationship and dialogue with Finanstilsynet and we of course have no problem with them overlooking PKA’s investments,” Claus Jorgensen, head of equities at PKA, told Infrastructure Investor. “With that said, PKA has for a number of years now had the right team with the right competencies to carry out the investments in infrastructure, private equity and other alternatives to get the necessary returns for our members’ pensions. We saw that with the sale of the Butendiek wind farm and KK Wind Solutions [in] late 2016 which gave a return of more than DKr2 billion.”

According to Infrastructure Investor Research and Analytics, PKA has an 11 percent allocation to infrastructure across its DKr47 billion assets under management. Industriens Pension and PensionDanmark have 9.4 and 9 percent allocations to portfolios worth DKr22.6 billion and DKr26 billion respectively.