Denmark’s largest pension investor ATP has boasted one of the best quarterly results in five years as investments returned 6%, despite “unusual” market conditions.

Chief executive Carsten Stendevad praised the fund’s domestic equity holdings, with their performance accounting for most of the DKK6.1bn in growth seen by its equity risk class.

Of the five risk classes comprising the investment portfolio, only credit and equities saw positive returns, despite a strong performance from ATP’s infrastructure and real estate holdings.

The two asset classes, which sit within its inflation risk class, saw their combined increase in value of DKK0.9bn wiped out by a loss stemming from part of its hedging strategy, the result of falling interest rates and inflation.

Commodities also suffered losses, due to the fall in oil prices, while its interest rate risk class suffered losses of DKK500m relating to holdings in domestic mortgage bonds.

However, Stendevad struck a positive note.

“It has been an unusual quarter, especially in the European financial markets, with interest rates reaching almost unthinkable levels, currency turmoil and surging equity prices,” he said.

Despite all-time low interest rates, ATP will be able to deliver “the good future pensions we promised our members”, Stendevad said, citing the fund’s hedging portfolio.

The hedging portfolio, which sits outside of the five investment risk classes, returned close to DKK77bn, offsetting an increase in liabilities of more than DKK64bn that resulted from changes in longevity and lower discount rates.

The results compare favourably with some of the larger European investors, although several large Dutch pension funds proved less able to absorb the increasingly low rate environment.

ABP, the €373bn fund for civil servants, saw its funding at the end of the first quarter decline 2.1%, falling further below the minimum required by the regulator.

However, the largest Dutch pension fund and its counterparts all saw strong returns on the back of rallying equity markets.

Double-digit equity returns have also been common for Finland’s pension investors, but the results often praised as outstanding – and hitting 17.7% in the case of Ilmarinen – are often contrasted with low returns from all other asset classes.

Read ATP CIO Henrik Gade Jepsen’s thoughts on private markets in the current issue of IPE

Topics