Low levels of currency hedging boosted the returns of Danish pension providers in the first quarter of 2019, but equity risk was the deciding factor on performance, according to Willis Towers Watson.

Both the highest and lowest performing of Denmark’s main commercial pension providers were boosted by their currency hedging positions, the consultancy’s analysis showed, but adopting an aggressive or defensive investment strategy after the market rout in late 2018 had more of an effect on returns.

Danica topped the first-quarter performance table with an 8% return for an investor with 50% in equities and 50% in bonds. SEB ranked a close second with 7.7%, while insurance and pensions firm TopDanmark was bottom, returning 5.8%.

In three other age-related profiles, Danica placed top in two profiles and SEB led the third.

Morten Linde, head of savings at Willis Towers Watson, said: “Danica’s portfolios have performed particularly well in the first quarter, because Danica has chosen a slightly more aggressive investment strategy than the other pension companies.

“Danica has also chosen lower currency hedging, which has had a positive effect, as the US dollar rose by 2.2% in relation to the euro in the first quarter.”

TopDanmark also opted for a low currency hedge approach, but was more defensive in its investments, he added.

“This has cost the return in a quarter, where high risk turned out to be the right strategy,” Linde said.

While equity markets had performed strongly across the board so far this year, Linde warned these rates of returns were not expected to continue throughout the rest of 2019.

“The first quarter has been an unusually good quarter, so one cannot expect to get the same high return for the rest of the year,” he said. “The big increases are a response to the fourth quarter of 2018 being very dramatic, but the economy is still quite robust.”

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