LD Pensions takes unusual alternatives route

Operational constraints and the regulatory burden have made LD Pension turn elsewhere for its alternatives exposure than the traditional private market route. Similar to getting the real estate exposure through Reits, the DKK 46.1 billion (EUR 6.2 billion) Danish pension fund is looking to invest in private equity through listed investment companies instead of unlisted private equity funds. It is not liquidity needs that has been the primary driver behind the pension fund opting for a more liquid way of investing in illiquid assets. Over the past few years, the Danish Financial Supervisory Authority has intensified its requirements on the Danish pensions sector to be on top of the valuations of their alternative investments. This has increased the administrative burden of investing in unlisted assets, in particularly making it challenging for smaller pension funds to keep up with the valuations of the underlying assets of alternatives portfolios.

In addition to the regulatory aspect, Kristoffer Fabricius Birch, head of portfolio management and co-chief investment officer at LD Pensions, notes that its limited internal resources for selection and monitoring of external managers further complicates the private market route into alternatives. Listed investment companies, sometimes referred to as listed closed-ended funds, are listed on a stock exchange and have an independent board, which in turn appoints an external manager to invest on behalf of the company. As perpetual vehicles, there is no need to sell any underlying assets as investors move in or out. New investors buy the shares of