PensionDanmark, AP Pension and AkademikerPension have backed a new European defence fund headquartered in Copenhagen, committing to a joint investment of €220m (DKK 1.6bn).

The three Danish pension funds will be anchor investors in the new Danish private equity fund ETNA, which will invest in small- and medium-sized companies in the European defence industry, including cybersecurity and protection of critical infrastructure.

In particular, PensionDanmark is investing €100m, while AP Pension and AkademikerPension are investing €70m and €50m, respectively.

Announcing the commitment, the funds argued that the military buildup in Europe should not only contribute to the security of the Danes, but should also contribute to future pension payments.

This comes amid growing interest in defence investment in Europe, with the European Commission recently sharing its ReArm Europe Plan, which aims for member states to mobilise €800bn to increase defence budgets.

Indeed, PensionDanmark CEO, Peter Stensgaard Mørch, argued that "the need for rearmament in Europe is both great, necessary and urgent".

"ETNA's focus on growth and scaling of small and medium-sized companies in the European defence industry allows us to both create attractive returns for our members' pensions while contributing to society's security and Europe's innovative power," he continued.

"That is why we have chosen to take on a central role in making the fund a reality."

This was echoed by AkademikerPension CEO, Jens Munch Holst, who warned that "the security situation is worse than ever in recent times".

"Russia continues its brutal war against Ukraine, and Europe is constantly exposed to Russian hybrid attacks in several areas. At the same time, Europe is very isolated when it comes to security policy," he stated.

"In that context, it makes maximum sense as a responsible pension fund to establish such a fund, as we both demonstrate social responsibility and at the same time have the opportunity to deliver a good return to our members."

Adding to this, AP Pension CEO, Bo Normann Rasmussen, said: "It is crucial for the future of Europe to ensure peace and security, and this requires that we have a credible defence.

"We believe that the type of innovative companies that ETNA will collaborate with will play a crucial role in this development.

"With the great potential that lies in the fund, I am very pleased that PensionDanmark has taken the initiative for the partnership."

With its size and focus, the fund is expected to become a significant player in a European context, where there are currently very few private equity funds dedicated to defence investments.

The fund's main focus will be "buyout" investments, where it acquires a majority stake in the selected companies with the aim of actively working on their development during the ownership period.

In addition, ETNA will have the opportunity to make minority investments and so-called "growth equity" investments.

Broader progress has also been seen as a result of pension funds' investments in the defence space, as the Danish Armed Forces recently confirmed that it had awarded the task of building its new barracks to PensionDanmark and MT Højgaar, following a public tender.

As part of this, PensionDanmark and MT Højgaard will deliver a total financial solution across financing, construction, operation and exterior maintenance of a total of 31 properties distributed across 11 barracks in Denmark. 

The construction sites are spread across Denmark and include Naval Station Frederikshavn, Bangsbo, Aalborg Barracks, Skive Barracks, Karup Air Station, Holstebro Barracks, Varde Barracks, Oksbøl Barracks, Ryes Barracks in Fredericia, Naval Station Korsør and Antvorskov Barracks near Slagelse.

"We are proud and happy to have been awarded this important task and look forward to the collaboration with the Armed Forces," Stensgaard Mørch stated.

"It will be a historic boost to the accommodation for Danish soldiers, and our offer has both high quality in construction and the potential for attractive returns for our members.

"We look forward to using our strong competencies and experience from construction for the Armed Forces Intelligence Service, together with MT Højgaard.

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