Danish pension fund Lønmodtagernes Dyrtidsfond (LD) underperformed its benchmark by 1.4 points in the first half of this year, a result the fund largely blamed on its defensive equities strategy.

The balanced portfolio used by most of LD’s customers, LD Vælger, finished the six-month period with a 0.8% loss, compared to the benchmark’s 0.7% profit.

Since the benchmark index does not include costs or currency hedging, LD said its underperformance actually amounted to 1.4 percentage points, which it said in its interim report was “not satisfactory”.

The DKK45bn (€6bn) pension fund said it lost DKK311m in the first half of the year as a result of the underperformance.

However, in comparison with other European investment funds as rated by research firm Morningstar, said LD, the investment return was satisfactory.

Its LD Equities & Bonds fund – in which 98% of LD Vælger assets are invested – remained among the top 10% of funds in Morningstar’s ranking of 700 European funds, the pension fund said.

In its first half results statement, LD said: “LD’s defensive equity strategy meant that LD was significantly underweight in growth shares, which yielded relatively high returns during the period.”

These included global players such as Facebook, Amazon, Apple, Netflix and Google, all of which have had major price increases over a long period of time, but also showed large fluctuations over short periods, it said.

“The underweight of growth shares was a major reason why LD’s return on equity did not match the benchmark,” it said.

LD said it had rebalanced its portfolio in relation to its benchmark, which was changed on 1 January this year.

The benchmark was changed in order to lower strategic risk for LD Vælger.

Gilt-edged bonds were given a higher weighting and cash was included in the new benchmark index, while the proportion of riskier assets including corporate bonds and equities was reduced, although alternative credit was increased, LD said.

At the beginning of the year, LD said the allocation to corporate bonds and to a lesser extent, gilt-edged bonds, had been overweighted in relation to the benchmark, while alternatives were underweighted, although the latter were increased during the first half – financed by the sale of corporate bonds and gilts.

Equities, on the other hand, had a neutral weighting for the whole period.

LD is a non-contributory pension fund based on remaining cost-of-living allowances that were granted to Danish employees in the 1970s.

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