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    Alternative investments

    Alternative investments are expected to generate higher and more stable returns than traditional listed assets, and at the same time they contribute to achieve greater diversification.

    Alternative investments are often defined as the opposite of traditional investments like bonds, shares and credit bonds. However, alternative investments can also be characterized based on their common characteristics:

    • They do not fluctuate in pace with the traditional investments, and consequently they have a stabilising effect on the portfolio’s total return.
    • Typically there is no liquid market, and consequently these assets usually generate an additional return which compensates for this.
    • The individual investments often stand out – also within the same category.
    • They often require a long investment horizon.
    • The investments require quite a lot of preceding analysis and are typically legally complicated.
    • The minimum investment is typically an amount in the double-digit million range.

    P+’s alternative investments consist overall of investments in private equity (venture capital funds), alternative credit, real estate, forest and infrastructure.

    A private equity fund creates value by bying into controlling influence in (often unlisted) public limited companies and then streamlines the organisation/operation/management for the purpose of later sell-off or stock exchange listing. Other private equity funds focus on providing venture capital to start-ups.

     

    To ensure a certain diversification, P+ generally invests through funds that both deal with the company selection and the day-to-day management of the portfolio.

     

    We have higher expectations to both return and risk for the unlisted companies compared to the listed equities. Furthermore, it is illiquid papers where the value of the investment cannot be determined until the underlying companies are sold. 

    These investments are typically defined as credit investments which either require specialist knowledge compared to listed credit bonds or which are less transferable than listed credit bonds. 

     

    The investment universe includes e.g. investment in subordinated debt in small and medium-sized companies, non-performing loans from companies and private persons, debt to funding properties and structured credit.

     

    P+ cooperates with a number of alternative credit investment managers.

    Properties are residential and commercial properties, building sites etc. The return on real estate investments derives from surplus related to renting and value increases. 

     

    Real estate investments provide security against rising inflation as both rentals and the property value tend to follow the common price and wage development.

     

    P+'s real estate investments are primarily made through funds which ensures a diversification on both property types, countries, continents and risk. The directly owned properties are managed in coooperation with DEAS.

     

    P+ has approx. 3,200 apartments, primarily in Copenhagen and surroundings cities which are rented with preference to the pension fund's members.

    Forest is a cross between real estate and equities, but with the special characteristic that the trees provide ongoing value increase as a result of daily growth. A long-term investor can exploit this at the optimum time in relation to timber and possibly real estate prices depending on the location of the forest, and where the value of the timber follows the demand and price development of building materials. 

     

    Fire and storm damages constitute a risk in relation to forestry, but major damages are rare, and furthermore the forests are partly insured against this. P+ has further reduced the risk by spreading investments to several continents, a lot of regions and a number of different wood species. 

     

    Infrastructure includes physical facilities like transportation and communication in a society - that is roads, railways, pipelines, electrical cables and telephone connections. The asset class must be seen in a broader context that also includes education, the social and healthcare system and other public services.

     

    The revenue from infrastructure is most often generated in the form of user charge and thus it reflects the general activity and price development.