ATP branches out to drive performance

The $122bn Danish pension’s ‘infrastructure’ portfolio has more than doubled returns year-on-year. Here we zoom in on the timberland holdings that have helped push this growth.

When listed equities have a tough time, it often makes it easier for other asset classes to shine.

Denmark’s ATP experienced this in the first half of this year, when the pension’s ‘infrastructure’ portfolio – which includes forestry – became the second-biggest driver of the scheme’s performance.

In H1 2018, listed equities recorded a negative performance of Dkr2.1 billion ($330 million; €280 million), mostly owed to paltry returns in emerging markets. Infrastructure performance, in contrast, more than doubled year-on-year, from Dkr648 million to Dkr1.5 billion.

While declining to provide a detailed breakdown, ATP said “the return was boosted broadly across the portfolio,” with further vim provided by several disposals.

Of ATP’s forestry holdings, valued at Dkr2.45 billion according to pension documents, the majority is in the Australian state of Queensland (54 percent). That forest, of which ATP owns just under a third, spans an area of 204,000 hectares and is currently valued at Dkr830 million. It is managed by Hancock Timber Resource Group, which bought a 99-year licence to operate it in 2010 from the state of Queensland for A$603 million ($435 million; €374 million).

The pension’s second-largest forestry holding by value is the forest of Ouachita, which covers 23,800 hectares and stretches from Louisiana into southern Arkansas, accounting for 16 percent of the portfolio. Upper Hudson Woodlands (38,000 hectares) and Northwoods Wisconsin (23,800 hectares) come next, with Wolf River, also in Wisconsin, the smaller asset (7,400 hectares).

ATP first announced plans to invest in forestry through a dedicated subsidiary in 2009, pledging to deploy up to Dkr3 billion in the asset class and singling out Australia, the US, New Zealand and the EU as target markets.