DENMARK - ATP Group, Denmark's largest pension fund, saw profits decline over 50% year-on-year, as it unveiled a profit of nearly DKK4bn (€540m) for the first six months of 2012.

However, the scheme said that profits from investment and hedging activities amounted to DKK5.7bn at the end of June, only a DKK1.4bn decline over the same six months last year, amounting to a 5% pre-tax return according to guidelines set out by the Danish financial regulator.

According to the half-yearly results, profits came to DKK3.9bn, down 52% from DKK8.1bn in June 2011, with ATP noting that the euro-zone continued "unabated" over the period.

Lars Rohde, the outgoing chief executive of ATP Group recently named governor of Denmark's central bank, said that the first half of the year was "generally marked by great financial market uncertainty".

"Low interest rates also present a challenge for a pension provider such as ATP, and against this backdrop, we are satisfied with the results," he added.

Breaking down profits from investment and hedging, the scheme's report said that over three-quarters of said returns came from the fund's investment activities, with four out of the five investment classes generating positive returns.

The remaining DKK1.3bn were a result of the scheme's hedging activities "thus meeting the objective of hedging ATP's pension commitments", it added in a statement.

Discussing the low bond yield environment that has seen Danish bonds post negative yields, chief investment officer Henrik Gade Jepsen told IPE: "Obviously one would hope that things would normalise.

"Unfortunately, that is not the reality we are facing," he said, adding. "The most important thing for us to be sure that we can pay out the promised pensions, even if this situation continues or the yield situation gets worse than it is today."

Discussing the potential for diversification away from Danish and German sovereign bonds - which, alongside interest rate swaps comprise the entirety of the fund's 'rates' risk class - Gade Jepsen said that if such as diversification into less creditworthy bonds were to occur, it would have to be as part of its 'credit' risk class.

At the end of June, total assets under management at the fund amounted to DKK602bn.

Topics