Investor Profile

Danish fund allocating tactically to capture opportunities

One of Denmark’s largest industry funds, PensionDanmark is embracing the opportunities presented in the current climate, and has increased allocations to credit. Amanda White spoke to the fund’s CEO, Torben Pedersen, about its investment strategy.

Torben Pedersen, chief executive of PensionDanmark, is upbeat, and perhaps a little opportunistic. While on paper, the fund is sceptical about the world economy, the board, and Pedersen, are embracing the opportunities that presents dramatically increasing the fund’s allocation to credit.

At the end of 2008, when the last annual strategic asset allocation review was undertaken, credit allocations were around 6 per cent. As of this month credit now accounts for 12 per cent of the portfolio.

When this most recent change was made it was also decided to decrease listed equities from about 35 per cent to 15 per cent, with a number of mandates terminated as a result.

“We reviewed our overall asset allocation in December last year, as per the annual review, and then because of current market conditions we did it again earlier this year, and have agreed with the board and the investment committee to conduct quarterly reviews,” Pedersen says.

The fund, which has 540,000 members and 9.4 billion euros in assets (US$11.8 billion), will continue reviewing its asset allocation on a quarterly basis until investment markets are considered by its team to be ‘more stable’.

In addition to the reduction in equities and increase in credit, the fund has also allocated about 20 per cent of its portfolio to inflation-protected investments (which includes real estate, infrastructure and indexed-linked bonds), with bonds overall accounting for about 53 per cent.

The fund, which ranks among the top 250 in the world by size, has a strong focus on outsourcing including part of its portfolio management and back office.

There are 75 staff in total, including about 12 in investments, headed by chief investment officer, Claus Stampe.

The team manages about 70 per cent of the credit products internally and passive equities in US large cap, Europe, Japan, and emerging markets are also managed in-house. The fund is fully hedged to the US dollar.

“We still prefer to use external funds managers for active mandates and internal for passive, and we will continue with that,” Pedersen says. “Our new asset allocation means that for a period we will reduce the number of external equities managers.”

In addition, a by-product of the new asset allocation is a reduction in fee levels, with more money allocated to the more basis point-friendly asset classes.

“That’s not the primary reason but it is a welcome by-product,” Pedersen says.

The fund, is however, conscious of costs, and is cognisant there are always ways to make the running of the fund more efficient.

“There is always a chance to do things smarter and more cost effectively, and with low rates of returns on investments, then reducing administration costs will become a focus for funds,” he says.

Pedersen says the philosophy is to outsource labour intensive and long-term processes and about 75 per cent of the administration budget is spent on outsourced partners.

The fund is also looking at ways to use the advanced digital infrastructure in Denmark, and Pedersen has a vision to become the first form-free pension fund in Denmark.

In the past couple of years the Danish pension industry has seen a number of mergers in part to benefit from economies of scale, and Perdersen believes that will continue.

PensionDanmark’s funds managers

The fund’s managers include: T Rowe Price and MacKay Shields for global high yield; BankInvest and BlueBay Asset Management for emerging markets debt; Credit Suisse, ING, Eden Rock, Goldman Sachs Mezzanine and TCW Energy Fund for credit; Carnegie Asset Management, Marathon Asset Management and Nordea Investment Management for active global equities; Lazard and JP Morgan for North American equities; Hermes Focus Asset Management, Netptune, and TT International for continental Europe; State Street for emerging market equities; and Acadian Asset Management for Japanese equities.

Chief executive of PensionDanmark, Torben Pedersen, is available to take questions from fellow users. To email him with queries about his fund’s investment strategy or related fund issues please click here


PensionDanmark is a Danish industry fund with 540,000 members who are employed in 35,000 private and public companies. The largest sectors covered by PensionDanmark are construction, transportation, hotels and restaurants, cleaning, agriculture and dairies.

Assets: DKr70.4 billion (US $1.1 billion)

Asset Allocation: (January 2009)

Equities: 15%

Credit: 12%

Inflation-protected investments: 20%

Bonds: 53%


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