PensionDanmark A/S, the Danish retirement fund with more than a half-million members, plans its first foray into onshore wind power as long-term infrastructure investments may help counter stocks that underperform.
“We expect to disclose our first investment in a large onshore wind park this year,” Chief Executive Officer Torben Moger Pedersen said in an interview in London. The fund, which allocates 7 percent of its portfolio to energy and infrastructure, plans to spend 2 billion euros ($2.5 billion) in five years to reach 10 percent, he said.
Pension funds and insurers are seeking alternative investments after a decline in interest rates hurt bond returns and equity-market volatility increased. Wind farms, promoted by European nations chasing climate goals and supported by subsidy programs, operate for about 25 years, offering steady gains for institutions with long-term savings.
PensionDanmark has already invested in offshore wind. In early 2011, it bought 30 percent of Dong Energy A/S’s Anholt project, Denmark’s largest offshore wind farm and the first investment by a pension fund in an unbuilt wind park at sea.
While the Copenhagen-based fund doesn’t plan to announce further offshore wind investments this year, its 2 billion-euro spending plan could enable it to buy a “substantial” share in one offshore wind park a year in the future, Pedersen said.
PensionDanmark, with 622,000 members and 16.8 billion euros in assets last quarter, has also started buying bank infrastructure loan portfolios as alternatives to government bonds and equities as Europe’s debt crisis persists, Pedersen said. The groups of loans deliver “slightly better” returns than U.S. high-yield bonds issued by companies, he said.
“European banks are in a situation where it’s not profitable for them to keep long-term credit on their books,” he said. “We have a need to find alternative sources of capital both on the equity and debt side if ambitious plans for transforming the European economy to a green one” are to be realized.