Denmark’s Danica Pension is investing DKK1bn (€107m) in medium-sized businesses in Denmark, through direct investments, via a new fund.

The fund, called GRO Fund, is being set up as an independent unit under Gro Capital, which will be managed by Lars Dybkjær, managing partner of private equity fund DKA Capital, the Danske Bank pensions subsidiary announced.

Jacob Aarup-Andersen, Danica’s CFO, said: “Direct investment is a good match for our pension customers. 

“It offers attractive returns with an additional illiquidity premium and often long investment horizons.”

Further, Danish growth companies are attractive to invest in, and the small and medium-sized enterprise (SME) sector has great potential, Aarup-Andersen said.

The fund would look for strong, innovative businesses to invest in.

It will focus on minority investments in medium-sized companies, meeting the increasing need for capital in the sector, where a company’s owners do not want to give up control of their business.

Danica said the investment was “a natural progression of Danica Pension’s enhanced focus on direct investment in mainly Danish and Nordic enterprises, in which we are planning a double-digit billion DKK investment over the coming years”.

The fund’s focus also complements Danske Bank’s lending activities, it said. 

In the summer, Danica Pension announced a new investment strategy entailing the replacement of some its bond investments with direct investments in companies.

Dybkjær said Danish enterprises were not short of loan capital, but they did need subordinated capital and equity for expansion. 

“It is this need the fund will address,” he said.

The fund will typically invest between DKK50m and DKK200m in companies that have already demonstrated a viable business plan.

“In other words, we are not looking to invest in start-ups,” Dybkjær said.

“Enterprises with annual revenue of DKK150m are more are the segment we are interested in.”

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