DENMARK - Denmark's huge labour market pension fund ATP has been steadily increasing its exposure to the oil market and other investment sectors that will do well under conditions of higher inflation.
Henrik Gade Jepsen, chief investment officer for the pension fund's beta investments, told IPE: "We have been focusing more on inflation-linked assets. We have added exposure to assets that should do well under market conditions where more traditional assets fare poorly," he said.
ATP has stepped up its exposure to the oil market over the last 12 months, to a point where it now has around $3.5bn (€2.3bn) in oil-related assets, according to Gade Jepsen.
Though the fund has not bought oil futures directly, it has gained the exposure through a bond format, where the return is linked to the oil market, he explained.
"In certain scenarios, oil and commodities are the only things that do well, so they are a good diversifier," said Gade Jepsen.
Alongside the extra oil market exposure, ATP has also upped its investments in inflation assets, including index-linked bonds, real estate and infrastructure assets. The move was, he said, all about diversification and mitigating the destructive effects of rising inflation on pension fund finances.
"Inflation makes it harder for us to reach our target," he explained. "We really want to get to a situation where we do well in a broader range of scenarios."
ATP splits its assets between a hedge portfolio and an investment portfolio; the latter is in turn divided into an alpha and a beta portion. Within the investment portfolio, the DKK441bn (€59.12bn) fund holds five asset classes - equities, government bonds, credit bonds, inflation assets and commodities.
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