DENMARK - ATP, Denmark's largest pension fund, has reported a fall in its investments of DKK5.3bn (€725m) following negative investment returns for the first nine months of 2008 of -1.4%.

Figures from the pension fund showed the value of its investment portfolio was DKK367.6bn as its results were affected by a negative return on its equity investments of -14.7%.

However ATP pointed out this compared favourably with the average negative return of -25% in most equity markets, and attributed the difference to both diversification and its decision to hedge equity investments.

ATP's investments are split between alpha and beta portfolios, and within the beta portfolio - which returned -1.5% overall - equities were the worst performing asset class, although credit risk investments such as high-yield bonds and loans yielded a negative return of -1.8%.

Investments in global bonds and domestic and US mortgage bonds performed slightly better with a return of 1.4%, while the inflation-related risk class of assets - including real estate and foreign infrastructure - generated a return of 3.1%.

In addition, the commodities-related risk class, which comprises primarily of oil investments, achieved the best return of 17.5%, mainly thanks to earlier higher oil prices, although these were offset by negative returns from domestic equities of -19.4%, and listed foreign equities returned -16.5%.

Listed emerging market equities also had a negative impact on its results as assets fell -31.8%, although investments in private equity performed slightly better with a positive return of 3.2%.

Figures also showed the value of ATP's pension liabilities increased by DKK11.2bn over the nine months because of falling interest-rates, while a further increase of DKK8.8bn was attributed to the shorter term maturity of the liabilities.

However, the overall increase of DKK20bn was offset by gains from ATP's hedging portfolio, mainly using interest rate swaps, which produced DKK24.2bn before tax, and DKK20.6bn net.

Despite these figures, ATP confirmed it would increase all current and future pensions by a bonus of 2% from 1 January 2009, although it admitted its expectations for 2008 will be reduced by DKK25bn following the third quarter results.

Lars Rohde, chief executive of ATP, said: "Q3 has been quite a challenging quarter for ATP - and results in the red are obviously not satisfactory. However, I am pleased to see that our strategy of hedging against equity-price falls and increasing our risk diversification actually works."