​Velliv keeps shares underweight despite long-term return prospects

The chief strategist at Danish mutual pension provider Velliv has said the DKK255bn (€31bn) pension fund was still underweighting shares in its portfolio despite prospects for long-term equity returns being now much better thanks to aid packages from European and US authorities and the equities slump seen this month.

Henrik Henriksen, Velliv chief strategist, said the scheme’s position will help minimise the impact of short-term market volatility on customers’ pension savings.

“There is now a steady stream of stimulus coming from governments both in Europe and the US – and one thing they all have in common is that they are accompanied by remarks that if that is not enough, more will come.”

He said long-term return prospects had improved significantly, “both as a result of the aid programmes from the European and American authorities and as a result of the sharp fall in prices in March.”

Shares had fallen by more than 30%, which had noticeably improved the equities return prospects for the coming decade, Henriksen said.

US equities continued to be priced higher than the long-term average, he said, while the rest of the world was now priced below.

The return outlook for listed corporate bonds had also improved, he said.

“In the short term, however, we will still see significant turbulence. We are still underweighting shares in customers’ pension saving plans,” Henriksen added.

He listed three turning points that needed to be cornered before Velliv could take a more positive view on stocks: clear evidence COVID-19 had peaked in Italy; similar evidence in the US, not least in New York and California; and the stabilisation of the stock market.

“It is incredibly difficult to discover what is happening in the economy and below the surface these days, because things are happening so quickly and we have no precedent – except for China, where things are now moving in the right direction,” the Velliv chief strategist said.

This was why his team wanted to see evidence that the stock market had the capacity to take on risk again before upping investment risk levels, he said.