“We think it’s a nice asset class with good characteristics. It has a low correlation to other asset classes and is a good diversifier,” said Paul Brüniche-Olsen, chief executive officer at the fund.

The fund, which has invested in forestry since 2000, has almost 5 per cent allocated to the asset class, one of the highest timber allocations in Europe. It expects to increase that to 7.5 per cent within five years. It primarily has exposure to funds investing in the US, South America, Australia and New Zealand. Last year, the portfolio returned 7 per cent.

Going forward, Mr Brüniche-Olsen said he was interested in getting exposure to forestry in eastern Europe, where to date it has not invested.

The fund’s long-term allocation target for alternatives is 20 per cent of assets. Last year, it increased its investments from 8.9 per cent to 10.3 per cent. The fund also invests 2 per cent in private equity and 4 per cent in property.

Mr Brüniche-Olsen revealed he would make some further adjustments to the strategy, but would not disclose details. The fund, which has 64 per cent allocated to bonds and 26 per cent invested in equities, returned 2.1 per cent in 2007. Last year, it increased its bond portfolio by 4 per cent at the expense of equities.

The returns were 0.6 per cent above benchmark. Despite market turbulence, the fund had steady returns of around 2 per cent for the year. Mr Brüniche-Olsen said it was down to its risk diversification.

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