DENMARK - ATP Group has reported its investment portfolio returned 8.5% for 2009 to more than recover losses in 2008. However, officials have warned they are unsure whether investor will see gains at the end of this year as markets still look uncertain.

Figures from ATP showed it posted a return on its investment portfolio of DKK28.7bn (€3.9bn) last year, equivalent to 8.5%, as all five of its risk asset classes generated positive returns.

But looking ahead, ATP said while it expects global growth to gradually recover in 2010, “considerable uncertainty is attached to the strength and sustainability of the recovery. Although the financial markets have normalised surprisingly quickly after the financial crisis, it remains to be seen just how robust the recovery is”.

As a result, officials said it is “uncertain whether ATP will be able to ensure a bonus potential for 2010 that is sufficient to increase pensions at the end of 2010”.

Looking at the detail of ATP’s investment results, its hedging portfolio - which includes interest-rate swaps and long-dated bonds - produced a profit of DKK2.2bn as the spread between Danish and European swap rates widened.  

The report noted the combined performance target for 2009 for ATP’s investment and hedging activities was calculated as DKK8.3bn, or 2.3% of pension liabilities, however the final combined result of DKK22bn outperformed the target by DKK13.7bn.

Within the investment portfolio, the alpha portfolio achieved 5.8%, while the beta portfolio - split into interest, credit, equities, inflation and commodities risk classes - achieved an overall return of 8.6%.

Of the five risk classes, the interest rate section produced the best return in cash terms with a result of DKK10bn or 5.2%. On a percentage basis, equities recorded the highest figure and returned 22.5%, largely because listed domestic equities produced a return of 51% over the year. 

The commodities portfolio achieved 19.8%, closely followed by the credit risk class - comprising high yield bonds and loans - which returned 18%. The inflation class covering real estate, index-linked bonds and infrastructure also performed well with a return of 5.3%, or DKK3.5bn, despite a fall in inflation over the year.

Lars Rohde, chief executive of ATP, said: “The results achieved for 2009 are highly satisfactory. I am pleased to note that we have been able to increase ATP’s pension reserves to almost DKK 65bn - a rise of more than one-third.”

“ATP has more than recovered from the loss incurred as a result of the financial crisis in 2008. Despite the challenges in the financial markets in 2009, all of ATP’s five risk classes posted very positive results. This is quite unusual.”

The annual report also provided an update on the SP assets run by ATP following the government’s decision to allow account holders to withdraw their SP savings from 1 June 2009. ATP revealed DKK41.5bn of the SP funds had been disbursed by the end of the year, equivalent to 88%, leaving around 344,000 account holders with assets of DKK2.5bn.

ATP noted the portfolio’s allocation had to be changed to reduce risk and make it more liquid, to cope with short-term activity. So by the end of March 2009 the equity allocation had been reduced by 25% and the liquidity allocation had been increased while interest rate risk had been reduced.

Elsewhere, PensionDanmark has also posted a positive investment return of DKK10.4bn, equivalent to a net return of 12%.

Figures published ahead of the full report next month showed that high-yield bonds and mortgages posted the best return of 37.2%, while listed equities performed well with a return of 31.6%. Holdings in investment grade corporate bonds also achieved 19.1% over the year, which helped increase the scheme’s assets to DKK 88bn (€11.8bn).

Torben Möger Pedersen, chief executive of PensionDanmark, said: “The world economy has been through a very turbulent period. Happily, the financial markets and world economy have recovered since the spring. This means we came out of 2009 with a very good investment result.”

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