Denmark’s supplementary labour-market pension fund ATP suffered a loss of DKK200m (€26.8m) on investments between July and September because of instability in the markets, and lost more than DKK500m on its hedging activities.
In its interim report for the first nine months of the year, ATP said that, though its investment portfolio made a loss of DKK200m in the third quarter alone, it generated DKK11.2bn in the whole nine-month period, which equated to an 11.7% return.
This compares with a DKK9.2bn return in the first nine months of 2014.
ATP’s chief executive Carsten Stendevad said: “In a quarter with large negative returns in most global equity and credit markets, ATP’s portfolio has been robust.”
The investment portfolio contains ATP’s reserves, or bonus potential, which amount to around one-seventh of its total assets.
The rest is invested in a large hedging portfolio designed to back the pension promises in the face of changing interest rates.
The investment portfolio amounted to DKK100bn at the end of September, while total assets were DKK710bn.
ATP said the quarter had been marked by a large negative return in international equity markets and a moderate fall in Danish stocks.
Stendevad said ATP made positive returns on private equity, infrastructure, property and long-term insurance strategies against rising inflation during the quarter.
However, returns on commodities, corporate bonds and listed equities were negative.
ATP divides its investment portfolio into five risk classes.
Of these, interest rates made a DKK700m return in the third quarter, up from DKK300m in the same quarter the year before.
Inflation returned DKK1.2bn, down from DKK1.6bn, while credit lost DKK900m compared with a DKK600m return in the year-earlier quarter.
Equities lost DKK300m against a return of DKK4.7bn, and commodities lost DKK900m compared with a positive return of DKK600m.
ATP’s overall return for January to September was DKK4.2bn, down from DKK7.6bn in the same period a year earlier.
“Hedging generated a negative result of DKK1.9bn for the entire period, equivalent to less than half a per cent of the value of guaranteed pensions, which is considered satisfactory,” ATP said.
This compares with a hedging loss of DKK1.2bn in the same period in 2014.
The pension fund said heavy interest-rate fluctuations between the beginning of this year and the end of September made the value of its guaranteed pensions swing considerably, at times being DKK30bn lower than their value at the start of the year and at times DKK70bn more.
But by the end of September, they had returned to around the same level as at the beginning, it said.
In the third quarter alone, hedging activities made a loss of DKK548m.
ATP also reported that the Danish government was outsourcing public benefits to it.
The government planned to hand over responsibility for running the Danish National Board of Industrial Injuries and several public administration tasks at the end of the quarter.
ATP said it would do this work on a cost-recovery basis.
Three years ago, ATP was given the task of administering Udbetaling Danmark, the public authority responsible for paying out the state-funded old-age pension, the disability pension, housing and other benefits.