Denmark’s PFA seeking more Asian property partners

Having already linked up with Korea's Poba, Denmark’s largest commercial pension fund wants more regional tie-ups for big-ticket real estate deals in both Asia and Europe.
Denmark’s PFA seeking more Asian property partners

PFA, Denmark’s largest commercial pension fund, is ramping up its efforts to establish more strategic partnerships with Asia-based peers after linking up successfully with Korea’s Public Officials Benefit Association (Poba).

With a view to building two-way ties of mutual benefit, PFA's head of real estate Michael Bruhn last month visited other leading asset owners in Seoul and Beijing, he told AsianInvestor, without elaborating on the identities of these potential partners.

Michael Bruhn

“We can help Asian institutional investors in Europe if they want real estate exposure in the region,” Bruhn said. “That is our home turf where we can then source attractive deals for them to invest in alongside us, and vice versa in Asia.” 

That's after PFA partnered up with Poba for investments into European real estate.

Of the total DKK584.976 billion ($86.4 billion) in assets under management it had as of June-end, PFA had €9.5 billion ($10.5 billion) invested in real estate – with 8% invested in the UK, 43% in Denmark and 16% in the rest of Europe. 

The net return (after hedging costs) of its real estate investments was 8% in 2018, compared with a general negative return of 6.1% that was dragged down by the poor performance of its European and emerging market equity investments.


Real estate joint ventures (JV) and club deals are something PFA has been doing with other institutional investors for some years. By way of example, Bruhn mentioned its partnerships with German Allianz, Canadian Caisse de dépôt et placement du Québec’s real estate arm Ivanhoé Cambridge and Nuveen Real Estate, the real estate asset management arm of the Teachers Insurance and Annuity Association of America (TIAA).

“Through partnerships, we want more control over where our money goes and what they are invested in. Then we increasingly have the hand on the steering wheel when both our typical investment scope and the complexity of investment cases increase,” Bruhn said. 

Accordingly, P FA has over the last five years increasingly tried to move its investments out of large, commingled funds and into more niche vehicles with JVs, club deals and separate accounts in the US, Europe and Asia.


Given the late stage of the current cycle, price are high in general, Bruhn noted. Therefore PFA, globally, is looking for defensive strategies underpinned by megatrends driven by demographics and necessity rather than GDP growth. This is perhaps even more pertinent in Europe where investors are facing relatively lower growth than in the Asia and the US. 

“We are very active investors in the all types residential assets – regular multifamily, senior housing, student housing,” Bruhn said with reference to urbanisation trends globally. “We also believe in healthcare and medical industry assets, as it is necessity-driven; it is not a choice whether people get sick or not – it is not growth-related.”

PFA also believes strongly in the long-term emergence of ecommerce and, by extension, likes logistics assets, although traditional office assets and hotels are still on the radar, should the right opportunities present themselves, Bruhn said.

“Let me put this way, if the right opportunities were to present themselves, we have the dry powder to execute on even relatively large deals. So it is now more a matter of sourcing the right deals, and having the right partners,” he said. “Some of the large deals we see are somewhat off-market. When we enter with a partner, we can both access larger deals while spreading our risk, creating mutual benefits.”

As the scale and complexity increase, so does the relevance and value of partnerships with other institutional investors, he added.

“Our partnerships with TIAA, Ivanhoe Cambridge and others have now really started to show their full potential, because we can now bid efficiently and swiftly together on relatively large deals. It takes a bit of time and effort to establish these partnerships, but once it is done it indeed pays off,” Bruhn said.


Since the end of 2015, PFA has been working on growing its portfolio of unlisted investments, including real estate as a division of its own under Bruhn. Real estate investments comprised 11% the total AUM as of end-2018.

In an investment environment characterised by historically low interest rates and an increasingly insecure equity market, PFA has sought to incorporate other stabilising elements, apart from bonds, to help ensure the delivery of solid long-term returns, according to Allan Polack, PFA's group chief executive.

Allan Polack

“Previously, bonds were characterised by stable returns that helped create a solid financial basis for the customers’ savings. Now, unlisted investments possess many of the same characteristics,” Polack said in a statement last month after PFA's unlisted investments passed DKK100 billion for the first time.

Aside from building up its real estate investment portfolio, PFA has amassed DKK44 billion in unlisted equities, credit and infrastructure. It is co-owner of the world’s biggest offshore wind farm.

Performance data for the first nine months of 2019 highlight the benefits of this more diversified strategy. Further fuelled by strong returns on its equity investments, PFA posted a total investment return for this period of DKK57.3 billion before tax – the best nine-month return in PFA's history.

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