Denmark’s largest pension fund, ATP, recorded a 13.3% investment loss in the first quarter on its bonus potential, which is managed in a leveraged investment portfolio, as well as losses in other areas.
The statutory pension fund saw its overall assets decline to DKK 858.5 billion (€115.3 billion) at the end of March, from DKK 948.3 billion at the end of last year, according to the interim report published today.
Bo Foged, Managing Director of ATP, said: “It was difficult to generate good investment results in the first quarter as the war in Ukraine shook the whole of Europe and had a negative impact on stock prices and having sent higher interest rates.
But ATP has focused on strong results over time, he said, adding that over the past five years the pension fund has generated returns on its bonus potential of 18.8% every year.
“And if we look at the record results of the last three years, it’s no surprise that some comebacks have to be dropped,” said Foged, who is due to leave the ATP at the end of June.
ATP’s assets are now divided into three portfolios – the largest being the now DKK 719 billion cover portfolio backing the scheme’s pension guarantees, and the second largest being the yield-seeking investment portfolio consisting of the bonus funds, which amounted to DKK 138.5 billion at the end of March, plus borrowings from the cover pool.
The third part is the new “Life Annuities with Market Exposure” (LAWMA) portfolio, which has DKK 277 million in assets so far and is new this year due to a major change that the pension fund brought to its business model – adding a higher risk element to a proportion of new pension contributions in order to aim for higher returns.
Taking leverage into account, the investment portfolio had a market value of DKK 402 billion at the end of March, up from DKK 414 billion at the start of the year, according to ATP figures.
In particular, it was government and mortgage bonds and listed Danish and international equities that drove the investment portfolio result lower in the January-March period, ATP said in the report, adding that investments in inflation-linked instruments contributed positively to performance. .
Foged said the guarantees of a certain level of benefits that the ATP gave to members of the scheme – who include most of the Danish population – were not threatened by a difficult quarter.
“ATP’s finances are very strong and the political support for our new business model shows that we have now started to add a little more risk to our investments, and so we expect to generate higher returns over time. time, which will particularly benefit retirees of the future,” he said.
The new LAWMA portfolio recorded a loss of DKK 1 million in the quarter and hedging activities resulted in a loss of DKK 3.6 billion in the three months, according to the report.