Velliv is Denmark’s third largest and only customer-owned commercial pension fund, with a real estate portfolio representing 6.2% of total assets. In 2023, this achieved a total return of 0.5%, higher than the INREV Fund Index benchmark of -4.2%. The portfolio has also delivered a higher return than the benchmark over three, five and ten years.

Because of Velli’s ownership history, over 70% of the portfolio is in legacy commercial properties, mainly offices. To mitigate the resulting liquidity risk, Velliv is divesting smaller and management-heavy properties while adding or developing modern office, logistics and residential properties. Over the past year it has insourced management of its wholly-owned assets, worth around €1.5bn. This enables its own managers to execute investment strategy more rapidly, and cuts costs. Furthermore, it optimises long-term returns, in contrast with the short-term return maximisation which external asset managers could use to increase fees.

Recent developments in the macro-environment, particularly high inflation and rising interest rates, have led Velliv to change its optimal allocation to the different risk segments. During 2023, yields increased across all sectors, resulting in lower property valuations, while transaction volumes reached a ten-year low. This has created attractive investment opportunities, particularly if they are purely equity-financed, as the high cost of capital may exclude investors with high levels of leverage.

Velliv’s most attractive risk-adjusted returns remain in the core/core+ segments. However, value-add and opportunistic investments were given a larger allocation in 2022 and 2023, because of the macro environment. Velliv thus aims for an 80% allocation in core/core+, and 20% in value-add and opportunistic investments where significant risk-adjusted return can be gained.

The newest strategic initiative is to develop intergenerational residential communities housing mixed generations in a co-living scheme.