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PensionDanmark invests in infrastructure to boost returns

Thursday, 11 Oct 2012 | 11:00 AM ET

COPENHAGEN, Oct 11 (Reuters) - PensionDanmark became the latest manager of retirement funds to branch out in the hunt for higher returns, saying it would invest 1.6 billion euros in energy infrastructure in Europe and the United States.

The Danish pensions group would establish a new fund, Copenhagen Infrastructure Partners, and initially commit 800 million euro for investments in energy-related assets other than wind energy over the next three to four years.

"In response to the very low bond yields and uncertain economic outlook, PensionDanmark is increasing its investments in various types of infrastructure," said Torben Moger, managing director of PensionDanmark.

The group, which has 618,000 members and 125 billion Danish crowns ($21.62 billion) in assets under management, has already invested in wind energy projects, including with Germany's E.ON

and Danish state-owned oil and gas group DONG Energy .

The first 800 million euros investments in the fund would include electricity transmission, water supply and biomass-based power generation and would be focused on Europe and the United States, the group said.

PensionDanmark would then invest another 800 million euros itself over the next four to five years in projects which could also include wind energy, and which could be outside Europe and the United States.

The second round of investments would take PensionDanmark's

investments in infrastructure to about 10 percent of total assets from currently just over 4 percent.

"Over the coming years, we aim to increase our exposure to infrastructure significantly," Moger said.

Pension funds have increasingly been seen hunting for higher returns through buying direct equity stakes in wind power projects that are being shunned as too risky by banks and other investors.

It is a major change for the funds, which favoured government bonds for years until the debt crisis gripping Europe turned this once low-risk strategy on its head and drove down interest rates elsewhere, leaving few alternatives.

Japan's Government Pension Investment Fund, the world's biggest public pension fund, said last week it was considering whether to diversify further into alternative assets including infrastructure funds. � Copenhagen Infrastructure Partners expect to raise a second fund in three to four years time, which would be open to other investors, PensionDanmark said. ($1 = 5.7817 Danish crowns)

(Reporting by Mette Fraende; Editing by Toby Chopra)

((mette.fraende@thomsonreuters.com)(+4533969649)(Reuters

Messaging: mette.fraende.thomsonreuters.com@reuters.net))

Keywords: DENMARK ENERGY/PENSION