Nordea, Danica and Pædagogernes Pension (PBU) produced the highest returns among Danish pension firms for their customers last year, according to data compiled by an independent consultant, who listed several factors that weighed on providers’ performance in 2024.
A comparison table published on LinkedIn by consultant Nikolaj Holdt Mikkelsen showed that for medium-risk profiles with 30 years to retirement in 2024, Nordea Pension produced a return of 19.4%, while Danica’s Balance Mix product generated 17.8%, followed by a 16.1% return for the equivalent product from labour-market pension fund PBU — the only non-bank provider of the three.
Holdt Mikkelsen said in his commentary yesterday: “2024 was a good year for Danish pension savers with a return of 11.9% for a typical customer with 15 years to retirement and moderate risk.”
But he said this return was lower than the 17% return that would have been achieved with a 60/40 equity/bond portfolio in 2024 – an allocation similar to the average distribution for Danish pension profiles with moderate risk and 15 years to retirement – since global equities rose 25.4% and Danish mortgage bonds generated 4.7%.
He cited several reasons for the “significant performance drag” – currency hedging; home bias towards Danish stocks; illiquid investments; costs, and the impact of sustainable investments.
“Currency hedging of US stocks was an expensive business, totalling 10 percentage points in the form of 3% in hedging costs and 7% in lost dollar appreciation,” Holdt Mikkelsen said, adding that in a 60/40 portfolio with a moderate hedging ratio of 60% of dollar exposure, hedging was estimated to have dented the 2024 return by approximately 3.6 percentage points.
Regarding the home bias factor, he said that while global stocks had surged, Danish stocks remained stagnant and ended 2024 with a modest increase of 2.4%.
“Exposure or overweighting to small cap, value or European stocks also cost returns, but to a lesser extent than Danish stocks,” he said.
On illiquid investments, he said preliminary private equity returns for last year showed an average of 2.6% – far below the returns for global stocks and listed PE companies.
“The negative return contribution from this is estimated to be around one percentage point,” he noted.
Costs had reduced returns by 0.84% on average, the consultant said, while the return from sustainable pension products had been on average 0.7 percentage points lower than general pension products.
Sune Schackenfeldt, chief executive officer of PBU, said of the DKK87.4bn (€11.7bn) labour-market pension fund’s 2024 returns: “Our strong investment strategy has paid off for our members – the hard-working education practitioners in Denmark — who have received a return at the top level.”
“At the same time, we have the lowest costs in the pension industry, so as much of the return as possible goes into the members’ savings accounts,” he said, announcing returns yesterday.
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