DENMARK - ATP reported a profit of DKK3bn (€400m) in the first quarter, with investment returns bolstered by solid profits from the domestic equities market, but it warned of a tough investment outlook.

Lars Rohde, chief executive, said: "It is satisfactory that, in the face of the extended crisis, ATP continues to deliver positive results. Once again, ATP's balanced investment approach has proved its worth to our members."

The overall profit is the sum of an investment activities profit of DKK3.3bn, a loss on hedging activities of DKK700m and profits on pension and administration activities of DKK300m and DKK21m, respectively.

Reserves were increased to DKK77bn at the end of the first quarter from DKK74bn at the end of 2011.

All five of the risk classes in ATP's investment portfolio generated positive returns in the period, with the equity and credit risk classes the top performers.

Domestic equities achieved a return of more than DKK2bn.

The DKK700m loss on hedging activities after tax on pension-savings returns was narrower than the hedging loss in the same quarter 2011 of DKK1.7bn.

In its interim report, ATP said: "The interest-rate increase in Q1 triggered a drop in the value of pension liabilities and thus generated an income to hedging activities and an almost equally negative return on the hedging portfolio."
Hedging-activity results were expected to be zero over time, with minor fluctuations over the years.

ATP said hedging and investment activity results were DKK2.7bn in the quarter, compared with its target for the full year of DKK14.1bn.

Last year, the fund failed to meet its performance target of DKK15.1bn, producing an overall result of DKK2.6bn.

ATP's annual performance target is based on expected inflation and a premium of 1%.

The group describes the target as "ambitious" and says it expects to meet it over the long term.

Although the first quarter saw solid growth in equity prices, growth prospects for the rest of the year were muted, the fund said.

"Against the backdrop of continued subdued growth, the stage is set for a challenging investment environment for the remainder of 2012," it said in the report.

"The supervisory and executive boards find it important to maintain significant risk diversification of the portfolio to deliver positive performance - also for the remainder of the year."

Total group assets stood at DKK754bn at the end of the quarter, down from DKK779bn at the end of 2011.