DENMARK- ATP Group, Denmark's largest pension fund provider, has revealed investment returns substantially reversed in the first half of this year at the same time as it is raising costs to its members.
Details of the interim report, published today, show the group's return on investment moved from a DKK10bn gain in the whole of 2007 to a negative return of -DKK 9.9bn in the first six months of this year - reducing the total assets under management from DKK444.7bn (€59.62bn) in 2007 to just under DKK431.3bn by the end of June 2008.
ATP is responsible for managing the Denmark's giant labour market supplementary pension fund among others, so any changes to the asset management returns will be important to its liabilities.
Figures indicate ATP investment activity lost DKK1bn, equivalent to a negative return of -0.3% and similar to that experienced in the first quarter of this year, while the group's investment acitivity delivered a negative ‘DKK9.7bn after tax on pension savings returns of DKK1.6bn.
That said, officials claim the losses could have been much higher as ATP was "able to contain the [net profit] loss at DKK7.3bn in the adverse equity market conditions" because "a number of investment decisions paid off", including a move to hedge equities through derivatives and commodities.
This all comes at the same time, however, as ATP stated the total expenses - administration and investment - per ATP member are expected to rise from DKK62 to DKK76 - a rise of almost 20% along with a rise in investment while the average expenses for the supplementary pension (SP) will increase at a lesser sum from DKK32 to DKK36.
Further breakdown of investment returns shows the beta portfolio posted a negative return of DKK1.2bn but the commodity-related risk limited that sum as it generated a positive return of DKK4.8bn or 34.4%, along with a positive contribution of DKK1.4bn or 2.1% on inflation-related risk investments.
Equity-related beta investments - accounting for 18% of the portfolio - generated a negative return of 5.6% while alpha provided a DKK37m gain.
Lars Rohde, chief executive of ATP, warned, providing market conditions do not deteriorate further, "a loss of DKK3-6bn is expected before recognition of additional provisions of DKK1.2bn resulting from increases in life expectancy" - "a downward adjustment by DKK7bn from the expectations at the beginning of 2008".
He added: "Further equity price falls cannot be ruled out and the strong volatility in the bond markets - with no clear direction - is expected to continue."