Denmark Pushes Pension Funds to Invest Locally Amid U.S. Concerns

The Danish government is urging the country’s vast pension sector, worth 5.5 trillion Danish kroner (around 737 billion euros), to channel more investments into the national economy. This comes as some retirement funds rethink their holdings in the U.S., spurred by worries about financial stability and geopolitical tensions regarding Greenland.

Morten Bodskow, Denmark’s Minister of Industry, Business, and Finance, articulated that increasing geopolitical tensions necessitate that pension systems—both domestically and across Europe—take a more proactive role in fostering local job markets and supporting new technologies.

He emphasized that pension funds “need to boost their investments in Europe and particularly in Denmark, as well as in new technologies.” He noted that, while Europe holds substantial capital, its investment activity pales in comparison to that of the U.S., which, unfortunately, includes pension funds as well.

Bodskow’s remarks coincided with U.S. President Donald Trump’s recent threats of tariffs against European nations as part of his controversial attempt to acquire Greenland. This situation has fueled a political crisis and skittishness in financial markets, exacerbating fears that some European pension funds have too much exposure to U.S. assets. With concerns about a declining dollar and rising U.S. bond yields already unsettled investors, the stakes feel higher now.

The OECD highlights that Denmark boasts the second-largest pension system in the EU, just behind the Netherlands, with assets surpassing 200% of the country’s GDP.

Bodskow noted that pension funds are considering “the ramifications of our current global climate and the daily uncertainties it brings.” He added, “It’s crucial to remember that we need to invest in the future of our members, who were established here in Europe and Denmark… Therefore, they should invest more locally.”

Many Danish pension funds are now cutting back or fully withdrawing from the U.S. bond market due to apprehensions regarding the fiscal health of the largest economy in the world. For instance, PFA, the largest commercial pension fund in Denmark, divested its Treasury holdings last year, anticipating a weaker dollar. Similarly, Carpension announced it would liquidate its $100 million U.S. bond portfolio, attributing the move to inadequate government financial management in the U.S. The growing divide between Europe and the U.S. adds to the complexities they face.

According to Kent Damsgaard, CEO of Insurance and Pension Denmark, there’s been a noticeable shift. “Some pension funds are scaling back their exposure to U.S. Treasuries compared to just a year or two ago.” Although there remains commitment to investing in U.S.-listed companies, he noted the situation with Greenland injects “considerable political uncertainty,” raising the risks tied to U.S. Treasuries and other American assets.

As of late November, data from the National Bank of Denmark indicates that Danish pension funds had about DKr 659 million invested in domestic stocks compared to DKR 1.15 billion in U.S. stocks. While allocations to U.S. stocks grew last year, the pace of that growth has decelerated. In local currency terms, the overall holdings of Danish pensions and insurance sectors in U.S. stocks saw a 6.7% increase, down from 22% in 2024 and 18% in 2023. Meanwhile, European allocations rose by 2.9% last year, a slight increase from the previous year’s 2.6% growth.

Peter Stensgaard Molch, CEO of Pension Denmark, mentioned that the fund shifted 10% of its equity portfolio from North America to Europe in early March but hasn’t made significant geographic reallocations since then. The fund invests between DKr 2.5 billion and DK3 billion in global venture capital but has recently focused its efforts on areas where Denmark holds a competitive edge, like quantum computing.

To encourage investment in local startups, the government is collaborating with the Novo Nordisk Foundation to establish state-backed venture funds and provide DKK 1 billion to assist early-stage companies.

In a bid to further stimulate domestic investments, Bodskow held a meeting with leaders from Denmark’s largest pension funds, promoting investment in 55 North, a fund focused on quantum computing in Denmark and Europe, which aims to expand its resources significantly.

“This is clearly an opportunity for them to invest more into this partnership… They really need to be more proactive,” Bodskow stated.

While many fund managers are eager to capitalize on local opportunities, finding them appealing, one executive, who preferred to remain unnamed, described the government’s strategy of seeking funds for a single portfolio as “bizarre.”

Damsgaard added that while ministers are “right” to focus on stimulating investments in the venture market, he feels that “singling out one type of investment might not be the best approach” and advocates for a more ambitious effort to build a stronger capital base.