Denmark’s biggest pension fund banked its highest ever quarterly gain in the first three months of 2019 – but its CEO has warned that investment returns are set to be generally lower in future.

In the first quarter, ATP reported that assets in its return-seeking investment portfolio grew to DKK109.2bn (€14.6bn), from DKK92.1bn at the end of December, due to a record 21.7% investment return. Leverage effects brought the portfolio’s value up to DKK333bn.

Most of ATP’s DKK837.6bn of total assets are held in its hedging portfolio, with the portion relating to the fund’s bonus potential managed in a separate investment portfolio, which can borrow at market rates from the hedging portfolio.

ATP, which runs the statutory labour-market supplementary pension, said the 21.7% return was the highest ever recorded for a single quarter, and higher than the annual average return over the most recent one-, three- and five-year periods.

Bo Foged, acting chief executive, said: “We have realised an unusually good result for the first quarter of 2019 and delivered a very high return, which is highly satisfactory.

“With this having been said, we can also look forward to generally lower investment returns in the years to come, and at the same time we are seeing greater fluctuations between quarters.”

Because of this, ATP would maintain a disciplined approach to its portfolio construction and risk management in order to also create satisfactory results in the longer term, Foged added.

ATP’s new responsibilities

The pension fund also announced that it was to manage the Obligatorisk Pensionsordning (Mandatory Pension Scheme), following a Danish parliament agreement in March.

The scheme will come into force in 2020, and will initially cover more than 1m citizens making mandatory savings while on social welfare benefits.

Asked whether the extra funds would mean savings in terms of increased economies of scale for ATP, Foged told IPE that the overall impact of such effects was as yet uncertain.

“It’s difficult to say because you have different trends going on,” he said. “Of course this will increase economies of scale, on the other hand we are going more into alternatives and they are more labour intensive, so we have different factors pulling in different directions.”

ATP estimated that the new scheme would bring inflows amounting to around 40% of the deposits it currently receives.

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