DENMARK - PensionDanmark has revealed its solvency position is more than four times higher than the statutory solvency requirements, despite admitting it will probably end 2008 with a negative investment result.

The DKK70.76bn (€9.49bn) pension fund said in an update the recent market turbulence, which has been continuing for over a year, is "poised to develop into a global economic crisis, which may prove to be longer and deeper than any financial crisis in recent memory".

Although PensionDanmark assured members it had diversified members' savings in a range of different assets with different risk profiles - such as stocks, bonds, infrastructure and property - and even began reducing its holdings in equities in autumn 2007, it admitted recent events had impacted the value of the fund.

"Developments in financial markets have, however, in 2008 - and particularly since early October - been so extreme that the PensionDanmark has had losses on investments. Unless the market changes markedly in the last months [of 2008], the PensionDanmark will thus come out of 2008 with a negative investment result."

PensionDanmark warned members in a recent newsletter 2008 would not be a good year for the fund, as the half year investment returns was -6.9%, as its equity allocation is around a third of its assets. (See earlier IPE article: PensionDanmark warns investors of market woes)

Despite the negative developments, PensionDanmark claimed it is still classed as having a 'green light' under the Danish pension financial supervisory authority's traffic light system, and even has "substantial margins" before reaching the yellow and red light status.

PensionDanmark said its capital base "is more than four times as large as the statutory solvency requirements", and the amount of reserves mean it has not been forced to sell off its equity portfolio during the crisis, so it will be able to take advantage of further opportunities to increase its shareholding once the market has stabilised.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com