The size of undercapitalized banks' balance sheets in combination with increasingly stringent capital requirements for long dated loans has created a situation where many European banks need to shrink their balance sheet, which has created an opportunity for pension funds with long term capital to invest.
"The current market situation has created an opportunity, where we are able to acquire long term senior secured infrastructure loans at very attractive risk adjusted spreads. As such we have been looking at different models to enter into the market for secondary bank loans. JPM has a team of experienced credit professionals that will acquire and manage our portfolio. The mandate is structured as a segregated mandate where PensionDanmark acquires the loans on its own balance sheet, and has therefore been able to tailor the investment guidelines to our specific needs," says PensionDanmark CEO Torben Möger Pedersen.
"We are convinced that this new initiative will give our members a good and attractive risk adjusted return on their pension savings. At the same time we hope that PensionDanmark's initiative will contribute to loosen the credit squeeze in Europe that has made it difficult for many especially small and medium sized enterprises to get financing, which poses a serious risk to growth and employment in Europe," Möger Pedersen says.
Bob Dewing, head of J.P. Morgan Asset Management's infrastructure debt team adds: "We are very pleased to have entered into this significant and strategic mandate with PensionDanmark, who has shown deep understanding and great appreciation of the merits of the Infrastructure Debt asset class. This transaction is yet another confirmation of our premise that Infrastructure Debt is attractive to institutional investors wishing to match-fund their longer-term liabilities."
PensionDanmark's strategy: More investment in credit and infrastructure
The new JPM mandate is a continuation of the path first laid with the agreement with the Danish export credit agency (EKF) that PensionDanmark entered into in October 2011. Under that agreement, PensionDanmark has made 1.6 billion USD available in financing for Danish export orders. This makes it possible for foreign companies to take out loans for purchases from Danish companies. EKF guarantees that the loans will be repaid to PensionDanmark. The first loan in the program is a 165 million USD facility for a Swedish wind turbine project which has purchased 65 wind turbines from Vestas.
Apart from the agreements with JPM and EKF on investments in long-term credits of 2.5 billion USD in total, PensionDanmark has invested or committed a further 2.5 billion USD to infrastructure investments including its direct investment in Nysted and Anholt offshore wind farms.