COPENHAGEN (Reuters) -Danish pension fund AkademikerPension has lifted a self-imposed ban on investment in six of Europe's largest arms makers and some smaller groups, it said on Thursday, citing a worsening security situation and the need to boost European defences.

Many of the continent's investment funds exclude weapons manufacturers from their portfolios on ethical grounds, such as their involvement in the manufacture of components for nuclear arms.

AkademikerPension's decision to end its ban comes as Europe faces its largest military build-up in recent history, the fund said in a statement.

"We believe it is the most responsible thing to do - both in terms of return and social responsibility in the current situation," CEO Jens Munch Holst said.

"We don't want a small turnover from nuclear weapons-related activities to prevent us from providing capital to support the building of a European defence," he said.

The fund manages 157 billion Danish crowns ($24.61 billion), it said on its website.

NATO leaders on Wednesday backed the big increase in defence spending as demanded by U.S. President Donald Trump, and restated their commitment to defend each other from attack as tensions with Russia rise.

But there are question marks over how member nations will afford the targeted 5% of output on defence, leading to potentially difficult budget choices.

AkademikerPension's change of policy meant that the fund can again invest in Airbus, Babcock International, Dassault Aviation, Leonardo, Safran and Thales, it said.

Britain's Babcock said it expected to benefit from more UK government spending on defence as it lifted its medium-term forecast on Wednesday.

Serco Group, Ultra Electronics and Groupe Reel were also removed from AkademikerPension's blacklist, but it maintained a ban on 46 defence groups globally over links to controversial weapons or human rights violations.

($1 = 6.3788 Danish crowns)

(Reporting by Louise Breusch Rasmussen; Editing by Terje Solsvik and Rachna Uppal)