“We are having conversations with a few providers in order to expand our own knowledge of the area. The number of providers is sufficient to make it a competitive environment,” said Torben Möger Pedersen, chief executive officer of the fund.

The fund’s listed equity portfolio includes about 1,000 companies, but it only has a small stake in each company. The main reason it is opting to outsource is to keep costs down.

“Outsourcing the corporate governance activities will not only be cost-effective, but also effective from an engagement point of view, since our partner will pool together voting power from other institutions. That makes success more likely,” said Mr Möger Pedersen.

The fund already has some experience in the field, since they have co-operated with Hermes for some years and are part of its European focus fund, which is an engagement vehicle. Its Danish peer, PKA, has already teamed up with Hermes and joined its equity ownership service, but Mr Möger Pedersen admits that PKA is about six to 12 months ahead of PensionDanmark in this process.

The fund intends to sign up to the UN Principles for Responsible Investment at the end of this year, but put the move on hold until its corporate governance structure is in place.

“We find it more suitable that we should wait to sign up to the principles until we are able to fulfil our obligations. These technical issues should be resolved before we join,” said Mr Möger Pedersen. The fund will also need to deal with issues regarding its custody structure before appointing a corporate governance provider.

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