PFA Pension has installed Henrik Nøhr Poulsen as the new head of its foreign real estate operation, repositioning the equities and alternatives expert to lead its expansion of international unlisted property.

At DKK70bn (€9.4bn), PFA’s real estate portfolio is already the largest of any Danish pension fund, and the commercial pension provider has recently said it plans to expand this to DKK100bn within five years.

Nøhr Poulsen, who took the new title of executive director, head of international real estate at the beginning of this month, told IPE Real Assets he had been brought into the role by Group CIO Kasper Ahrndt Lorenzen because of the pension fund’s latest property expansion ambitions.

“He wanted to put someone with a longer tenure and a broader background in charge of that, and for me it’s an interesting and challenging opportunity,” he said.

Nøhr Poulsen has replaced André Bresser in the role, who is now leaving PFA.

Before his new job, Nøhr Poulsen was managing director, global strategic partnerships at PFA for a year, having previously been PFA’s CIO for equities and alternatives since 2015.

He has 25 years of experience at Danish bank and pension fund investment so far, including nearly 14 at Industriens Pension, as head of equities and subsequently head of investments.

PFA’s non-domestic real estate portfolio has changed in recent years, evolving from investments in European, Asian and US investment funds to direct investments in Germany, the UK and the Netherlands, Nøhr Poulsen said.

“Over the coming years, we will have a different focus from just a few years ago,” he said. “This is very much what I have been doing on the alternatives side, investing in assets such as wind farms. The underlying assets are different, but the background is that we are moving to more direct investment in international real estate.”

At Industriens Pension, Nøhr Poulsen was responsible for real estate for several years, and was involved in a number of deals in the Danish market along with the pension fund’s director of real estate.

“I know quite a lot of the real estate operators, which is an advantage and means we can hit the ground running,” he said.

With all of its property investments held either directly or in private unlisted funds, PFA has the largest privately-held real estate portfolio in Denmark, he said.

It is nearly 50% larger than that of Denmark’s largest pension fund, the DKK918bn statutory scheme ATP – which now appears to be scaling back its international activity.

Nøhr Poulsen said: “We are expanding. We are being very selective in the current environment, but it is a continuation of the existing strategy.”

Putting the real estate focus on unlisted and directly-held assets fits in with the strategy Ahrndt Lorenzen has been putting in place at PFA after joining the company from ATP a year ago.

A key aspect of his approach is to have clear insight into the underlying risks of all the pension funds DKK599bn of assets - and map the entire portfolio in these terms.

Real estate forms the bulk of PFA’s alternative investments, with the asset class being 40% larger than the pension fund’s other unlisted assets - which consist mainly of private equity and infrastructure.

“The better insight we have into the underlying assets, the better our understanding of the risk – and we are much more familiar with the risks we are running if we invest in buildings directly. Everything becomes more transparent,” Nøhr Poulsen said.

Another reason why PFA is reinforcing the direct route is the persistence of low bond yields. “Historically, our international real estate has been value-add and opportunistic,” he said. “Going forward, we are steering more towards core, lower-risk assets, looking more for investments which can help us generate a stable return.

“Obviously, in the lower interest-rate environment we are in, an asset base producing lower-risk stable yields can be a substitute for bonds.”

While PFA is working towards its DKK100bn target for real estate, how much of the expansion will be in foreign investments has not been set.

“And we don’t want to give any shorter-term targets either. Clearly we are extremely selective particularly since we don’t want to invest in anything that’s going to fall of a cliff due to the COVID situation,” he said.

Currently, PFA’s international portfolio is holding up well in the COVID-19 crisis, according to Nøhr Poulsen.

“Our international portfolio is predominantly residential, logistics and office, so the share that is invested in hotel, leisure and retail is very low,” he said. “Generally, our residential and logistics investments are keeping up very well. We see rents being paid as usual, and valuations are keeping up.”

While office is also keeping up, Nøhr Poulsen said that clearly in some markets, PFA was seeing tenants asking for lease breaks, though most were less affected by the pandemic.

“Where office properties have a coffee shop on the ground floor, they may be struggling, for example,” he said. “We are monitoring the situation for all our international holdings, but so far there has been little negative effect.”