LD Pensions, the Danish pension fund manager, has revealed 12 asset managers submitted bids for the listed alternatives mandate it offered this summer, as it works on its first foray into real estate and infrastructure.
Commenting on the tender launched in July – which closed on 17 August – for firms to manage an expected DKK2bn (€268m) of listed alternatives, LD Pensions said it was “breaking new ground” with the mandate.
Listed alternatives comprises investment trusts and similar structures which themselves invest in unlisted private equity (PE), unlisted real estate and unlisted infra, according to LD Pensions.
Kristoffer Fabricius Birch, co-chief investment officer and head of portfolio management at the Frederiksberg-based firm, said: “We have received 12 serious bids, which we are now looking forward to reading closely.
“As the market is still under construction, we were excited to see if we could find the right business partner. But fortunately it looks promising,” he said.
LD Pensions – which manages a total of around DKK46bn for the Holiday Allowance Fund (Lønmodtagernes Feriemidler) and the Cost-of-Living Allowance Fund (Lønmodtagernes Dyrtidsmidler) – has not invested in real estate or infrastructure before.
Fabricius Birch told IPE he could not comment on which managers were participating in the procurement process, but said they all met LD Pensions’ minimum requirements in terms of experience in managing listed investment trusts and similar structures.
“We had a history of PE investing, but that is 10-plus years ago,” he said.
Since then, LD Pensions had been unable to invest in unlisted alternatives, he said.
“This is the first time we are investing in listed alternatives. We want to invest in listed alternatives because we have administrative issues with unlisted investments, including how to price them correctly,” he said.
LD Pensions said investing in alternatives such as private equity (PE), property and infrastructure was typically resource-intensive, and since these asset types are not traded on a stock exchange, they could be difficult to value.
However, the firm said that because investing in alternatives is expected to increase the long-term return, it was now going down new paths to get alternative investments into the portfolio.
“In the work to find a model for alternative investments that suits our size and business, we have chosen to go via listed investment companies specialising in alternative investments,” LD Pensions said, adding that currently around 400-500 listed investment companies operated globally in the field of alternatives.
Of the two funds it runs, LD Pensions said listed alternatives were being earmarked for the Holiday Allowance Fund rather than the older Cost-of-Living Allowances Fund, because the former had a longer investment horizon.
“The new model for investments in alternatives must ensure that our members with frozen holiday funds share in the long-term return potential of alternative investments and achieve an even better spread of risk,” Fabricius Birch said.
“In the long run, the hope is, of course, that we can give our members an even better return,” he said.
The successful candidiate in the tender to help build the new alternatives portfolio will focus initially on PE, LD Pensions said. Other alternatives would be considered after that.
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