The main objective for PensionDanmark’s direct equity investments is to provide stable returns with a robust downside. This requires us to follow a disciplined evaluation process based on a number of well-defined investment criteria.
PensionDanmark has a targeted allocation of 10 to 15 pct. of assets under management in direct equity investments. The direct equity strategy covers an overlapping continuum:
- Real Assets: Investments in real assets aimed at providing a non-cyclical exposure with a robust downside protection (indicative IRR range of 6-11 pct.)
- Stable Equity: Investments in strong companies in mature sectors aimed at providing a solid return with a robust downside protection (indicative IRR range of 9-14 pct.)
We have a large inflow of capital and an ongoing need to invest. The objective is to build a diversified portfolio of directly owned assets over time within different sectors, geographies and with different risk profiles.
Following an opportunistic approach within the direct equity space, we have less focus on the specific asset type and more focus on the underlying risk characteristics. We prefer early stage involvement in the investment process, as it allows us to leverage our broad experience in deal structuring and risk allocation mechanisms.
We have an efficient decision process and significant resources to adhere to complex and compressed transaction processes.
By exercising active ownership through board representation, we focus on providing management with operational flexibility, whilst maintaining appropriate governance rights.
Direct Equity Investment Criteria
With our investment criteria as guidelines, we aim at delivering attractive, stable and non-cyclical returns with a robust downside.
PensionDanmark’s direct equity investments target real assets and stable corporate assets. Our preferred ticket size is approx. EUR 150m, but we will consider ticket sizes in a wider range.
Our main geographical focus areas are Western Europe and North America.
In assessing the risk profile we are very focused on downside protection. In that assessment we consider the below factors amongst others:
- Low demand risk
- Low correlation with the general business cycle
- Limited regulatory and political risk
- Preferably direct or indirect inflation linkage
- High barriers of entry
We have the ability to tailor the capital structure to meet the specific needs of our investments and can allocate additional funding to existing investments if required. We have the flexibility to participate in all layers of the capital structure.