Objective
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.
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.
Philosophy
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.
Investment Criteria
With our investment criteria as guidelines, we aim at delivering attractive, stable and non-cyclical returns with a robust downside.
Characteristics
PensionDanmark’s direct equity investments target real assets and stable corporate assets. Our preferred ticket size is between EUR 50m - EUR 200m.
Our main geographical focus areas are Western Europe and North America.
Risk Profile
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
Capital Structure
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.