DENMARK - Labour-market pensions group PKA is setting up a separate investment firm to focus on alternatives, targeting DKK12bn (€1.6bn) in investment over the next three years.

The new subsidiary - PKA AIP (Alternative Investment Partners) - will invest in private equity, woodland, agriculture and infrastructure, including wind energy, according to PKA.

Jens Henrik Staugaard Johansen, managing partner in PKA AIP, said: "In the last few years, PKA has gradually increased its level of investment in private equity, as well as infrastructure, agricultural and woodland, and the new company will be a natural extension of this strategy.

"We will become a close-knit little team that can concentrate on further strengthening the investment process to improve long-term profit," he said.

PKA said it was separating these activities from its investment department to increase the focus on this type of investment.
This would happen by cooperating more closely with other players in the market and by taking over some of the activities that have been managed externally up to now, it said.

Apart from Staugaard Johansen, partners in the new company are Anders Dalhoff and portfolio manager Christian Drews-Olesen.

PKA AIP officially started up on 1 April, and by the end of 2012, the team should consist of 5-6 staff, according to the plan.

Peter Damgaard Jensen, PKA's managing director, said: "PKA will continue to invest in so-called alternative investments, and we have created these opportunities by establishing PKA AIP, which will be able to use all its resources for just this.

"At the same time, the DKK12bn that the firm will invest shows we are taking this seriously."

The DKK160bn (€21.5bn) pensions group, which manages five healthcare-sector pension funds, said earlier this year it would step up investment in alternatives such as agriculture, commodities and infrastructure.

This would allow it to spread risk and achieve stable returns despite big swings on the financial markets, Damgaard Jensen said at the time.

Separately, PKA has recently taken the first steps in a major equities revamp, axing some traditional mandates to boost exposure to new sources of return such as low volatility, dividends and merger arbitrage.

The entire equities portfolio is being reengineered over the course of this year to take in a wide range of risk premia - or sources of return - to improve its risk-adjusted return and cut investment costs.