ATP's confirmation that it will be moving into the UK pension market was not, in itself, surprising. As anticipated, Morten Nilsson - now both head of ATP's international operations and the chief executive-elect for its UK entity NOW Pensions - announced that the defined contribution (DC) scheme's assets would be entrusted to the parent company's Danish investment office.
Nilsson told IPE that, although it was a subsidiary, NOW Pensions Investments' investment management would be done "using our experience and our track record delivering high and stable returns".
"We will be leveraging the Danish skill and the Danish process and the Danish know-how on delivering stable returns," he added, admitting that details of the fund choices had yet to be settled upon by the fund.
However, Nilsson said that NOW would stick to ATP's basic formula, although adjusting it to the UK market. He recommended that members let experts handle investments, focusing on targeting "exact" risk levels.
"We're not restricted by benchmark; we have the ability to move as the volatility moves," the Dane said. "I think if you have a dynamic investment approach and you do some life-cycling in addition to that, it will work very well."
ATP prides itself on guaranteeing low investment costs and in its annual report calculates that, including external asset management costs, DKK1.1bn (€147m) is spent on investing. This works out to a cost of DKK243 per member per annum. If ATP is able to replicate these cost efficiencies in the UK, then management fees per customer would be less than the price of buying a newspaper each day for a month.
ATP also allows for interest-rate fluctuations, as do many Dutch pension schemes, by hedging its exposure. At the end of last year, it noted that profits of nearly DKK3bn were the direct result of hedging.
However, by the end of June its hedge had performed less well, with changing interest rates over the first six months of the year - triggered by sovereign debt uncertainly in the euro-zone - causing it to lose €1.3bn.
In common with Europe's larger pension schemes, diversification will also be a key part of NOW's investment strategy. Here again, it will benefit from ATP's established track record.
"The proposition being launched will be based on the same risk classes that we use in Denmark," says Nilsson. "So it will be a highly diversified fund with commodities, credit, interest rates, equities, inflation."
Even in the unstable environment in the first six months of the year, ATP was able to post returns of up to 8.9% in its commodities portfolio, with 4.8% growth in inflation and 4.1% by credit. Interest rates returned 1.8%, despite the losses in its hedging portfolio, with equities, unsurprisingly, returning 1.2% at a time when market turbulence was creeping back in.
While absolute guarantees are costly, the experience that ATP offers to its 4.7m members bodes well for the UK market - especially as it is set to compete with the National Employment Savings Trust in improving the quality of the country's DC pension system in the wake of auto-enrolment legislation.