Danish pension firms pile on alts, as ​unlisted shares beat listed

Danish pension and insurance providers ploughed nearly three times as many resources into unlisted assets in 2018 and 2019 as they did into listed equities, according to the latest central bank statistics, which quantify the continuing investment trend.

The central bank – Danmarks Nationalbank – also revealed that unlisted equities had given pension providers higher profits than quoted stocks, with the more liquid securities returning 18.7% between January 2018 and December 2019, while unlisted shares had generated 20.4%.

The bank said: “Unlisted investments now account for close to one fifth of I&P (insurance and pensions) companies’ total investments.”

Insurance and pension companies – the assets of which are mostly pensions savings since Danish pension funds are largely incorporated as life insurers – invested DKK37bn (€4.9bn) into listed equities in the two-year period 2018/19, and DKK101bn in unlisted assets, the bank reported.

Over recent years, it said in the statistics release, low bond yields and low expected returns on other assets had prompted insurers and pension funds to continue investing more in unlisted assets such as wind farms, infrastructure, forestry, unlisted enterprises, private equity funds, properties and alternative types of debt.

The bank said its newly-developed statistics provided a comprehensive overview of this development for the first time.

In the last two years, I&P companies’ investments in unlisted assets increased to DKK803bn in December 2019 from DKK606bn, said Danmarks Nationalbank.

“This increase was fairly evenly distributed between new investments and fair value appreciations,” it said, adding that unlisted investments now accounted for almost a fifth of the sector’s total investments.

The new statistics consist of data reported since early 2018 by the 45 largest insurance companies and pension funds in Denmark.

The central bank said in December that it was ramping up its publication of data on the insurance and pension sector, as the industry became a more and more important part of the Nordic country’s economy.