DENMARK - Danish pension fund FSP is expecting to avoid the worst of the market rout by investing in good quality property and avoiding the most volatile market segments.

FSP (Finanssektorens Pensionskasse), the pension scheme for Denmark's financial sector, has 15% of its DKK23bn (€3.08bn) in assets invested in real estate.

"We believe a well-diversified portfolio will be helpful in difficult times," Steen Jørgensen, managing director of FSP Pension, told IPE.

"One of the reasons we have invested in property is there is a high level of volatility in bonds and equities, and despite the fact property prices go up and down, they are less volatile.

"You get good diversification if you try to invest in best quality, and I still believe that it will reduce volatility further. We have not only invested in very good quality property but also have looked at trying to avoid the most volatile assets," Jorgensen said.

As an example of this strategy, he cited the pension fund's investment in property fund Britannia Invest, which targets commercial property in the UK but excludes the volatile region of London.

FSP has no plans to change its 15% allocation to property, he said, although this proportion may be raised or lowered by a few points depending on circumstances.

"Last year was a good time to sell property. This year might be a good time to buy; if we see opportunities, we will of course take them, because we have liquidity," he said.

Between 2000 and 2007, FSP's property assets returned on average 13% a year. In 2007, the investment return for the asset class was 4.1%, which the fund said "should be seen in the light of many other property investors having had significant losses as a result of the American credit crises and the stalling of the residential property market".

FSP holds various different types of real estate investments spread across Denmark, Europe and the US. At the same time, FSP claims to be one of the few pension funds to have specialised in building and owning residential property.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email Julie.henderson@ipe.com

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