Returns in the low single-digits were common across the northern European pensions landscape in the first half of 2016, as bonds rallied while equities slumped. 

Nordic asset owners have faced a volatile few months plagued by equity losses, as shown by the interim results announced in recent weeks by pension providers and Norway’s sovereign wealth fund, Europe’s largest.

Returns ranged from a 2016 half-year result of 6.7% at Denmark’s ATP, to small losses such as those recorded by Finland’s Varma and Ilmarinen.  

A common theme was the positive contribution from bonds, pushing returns above zero as equities otherwise often produced a loss for many. 

Norway’s sovereign wealth fund, the Government Pension Fund Global (GPFG), announced a 2016 second-quarter return of 1.3%, saying that fixed income was the best performing asset class. 

Carsten Stendevad, outgoing chief executive at Denmark’s €107bn ATP, said the returns from alternatives and bonds – including the listing of DONG Energy – contributed to its strong return, while Danish equities netted a loss. 

In Sweden, SEK308bn (€32.7bn) buffer fund AP2 achieved a return of 3.7% with its emerging market investments in equities and bonds returning 6.7% and 13.4%, respectively. 

Jan Dehn, head of research at asset manager Ashmore, said emerging markets performed “a lot better this year than for some time”. 

Selected H1 2016 returns

In the developed markets, in the second quarter of 2016 the ECB inaugurated its Corporate Sector Purchase Programme (CSPP), with Bank of America Merrill Lynch credit strategists in late June noting the “impressive speed” with which the central bank acted under the CSPP.

“While we don’t think CSPP will act as a cure for credit volatility,” they wrote, “we do see it acting as a very effective ‘pain killer’, just as the outperformance of IG [investment grade] credit relative to equities, post Brexit, has shown.”

The impact of the UK vote to leave the European Union was discussed by several asset owners in their interim reports. 

Stefan Björkman, chief executive at Finland’s Etera, said Brexit “did not rattle Etera’s investment portfolio or solvency.

“The market movement caused by Brexit has not had any greater impact on our investment portfolio than normal day-to-day fluctuations,” he said.

The sentiment was shared by ATP’s Stendevad. “If you had asked before Brexit, we would have expected a negative impact on our portfolio, but the opposite has been true, with both stocks and bonds performing better than expected,” he said.

But not all investors were quite so positive about Brexit. NBIM pointed to the “increased volatility and uncertainty” as the reason for writing down the value of its sizeable UK real estate portfolio.