LD Pensions (LD Fonde) said the next 12 months are laden with huge uncertainty despite inflation being on its way down, as the Danish pension fund manager revealed an 8.2% loss on its main product for 2022.

LD Pensions said in a commentary on the 2022 investment results: “Despite positive returns in October and November, December has been affected by negative returns in all asset classes.”

However, there were signs that inflation had peaked, said the Frederiksberg-based manager which runs the holiday allowances fund, Lønmodtagernes Feriemidler, and the non-contributory maturing pension fund, Lønmodtagernes Dyrtidsmidler.

According to figures on its website just after the turn of the year for the various fund components of the two pension schemes, LD Choice (LD Vælger) – the largest investment pool for Lønmodtagernes Dyrtidsmidler – ended the full year with an 8.2% loss.

The holiday fund, meanwhile, ended 2022 with an investment loss of 7.9%, the figures showed.

Regarding the outlook for markets, LD Pensions said in the commentary published on 22 December that company earnings were expected to fall further in 2023, which would be negative for stock markets.

“However, the higher interest rates will help to increase the return on bonds,” the manager said, adding that bonds had therefore become more attractive in portfolios that contained both stocks and bonds.

“The focus going forward remains on inflation,” LD Pensions said.

“Although there are clear signs that inflation has peaked and is falling, central banks are nervous about loosening monetary policy too soon,” it said. It added that the US labour market remained strong, with higher-than-usual wage increases, which put upward pressure on inflation.

“The next six to 12 months are therefore fraught with great uncertainty,” the pensions manager said.

Markets expected central banks to continue raising policy rates, LD Pensions said, but added that the question was – at what speed?

“The speed really depends on how inflation develops, and the central banks have made it clear that inflation must be brought down, regardless of whether it is at the expense of economic growth,” the pensions manager said.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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