DENMARK - ATP, the DKK438bn (€59bn) Danish Labour Market Supplementary pension fund, is to increase its property and infrastructure allocation to half of its inflation-protected portfolio.
Henrik Gade Jepsen, chief executive of beta at ATP, told IPE Real Estate: "We don't have a benchmark but it's a good hypothesis that we'll double our exposure to inflation-protected assets in coming years from about DKK55bn (€7bn) to a little over DKK100bn," he said.
"We expect that about half will be invested in the less liquid assets - real estate and infrastructure - while the other half will be in index-linked bonds."
The scheme's investment in real estate will be worth around DKR30bn and most likely funded by the sale of short-term assets rather than downscaling of the scheme's other portfolios. ATP segments its scheme into five risk categories: government bonds, credit, equities, commodities, and inflation-protected assets.
"We need to fund the change but we're thinking about it in terms of risk," said Jepsen. "Selling short-term bonds would probably be our default option but that doesn't mean we'd decrease our exposure to the bond market or that we'd need to sell high-returning assets to fund it."
He said the boost to its inflation-protected assets was not simply an attempt to hedge against inflation.
"It isn't just a question of changing the allocation in case inflation goes up. It's a question of being properly diversified," he said.
"Traditional assets won't do well if there's a spike in inflation. We want a portfolio that does well in all economic scenarios. We want to be protected in all phases of the business cycle."