DENMARK – Returns at Denmark's ATP Group fell by nearly DKK67bn (€9bn) year-on-year as the country's largest pension fund saw gains from its hedging portfolio decline two-thirds over 2011's all-time high.

According to the group's preliminary annual results, returns for 2012 stood at 9.9% – down from the 26% of 2011, when its hedging portfolio alone boosted ATP's assets by nearly DKK108bn.

Acting chief executive Henrik Gade Jepsen said he was satisfied with the results.

ATP saw its highest returns, when measured in local currency, in the credit risk class, accounting for DKK4.6bn of the DKK12bn return from its five investment areas.

It also praised the domestic equity market, saying listed Danish stocks offered the greatest returns within the portfolio.

However, its commodity and inflation risk classes saw slight losses, reporting DKK200m negative returns, respectively.

Gade Jepsen told IPE that ATP's investment strategy was likely to be similar to that pursued over the last two years due to the "very challenging" environment.

He pointed out that, while financial markets had calmed during the second half of last year, "real progress" was still needed on a number of "fundamental" issues of concern to investors.

"I don’t envisage us increasing investment risk significantly until we see some real progress on the fundamental problems that are still out there – such as too much debt and too low growth."

However, he said he was happy at the nearly 10% return, which the annual report noted was achieved while not utilising the fund's risk budget to the full – due to the "significant uncertainty" in financial markets.

"That's really why we are quite pleased with the result," Gade Jepsen said, "because in light of the uncertainties we decided to have a cautious strategy this year – we didn't really use up the entire risk budget – in that light, we are quite pleased that we came out with high returns again last year without taking high risk on ATP’s members' behalf."

Gade Jepsen, who currently acts as the group's chief executive in addition to fulfilling his responsibility as CIO, confirmed he would return to his previous role once Carsten Stendevad took over as chief executive in May.

Stendevad, who joins from Citigroup in New York, was appointed five months after it was announced that long-serving chief executive Lars Rohde would become governor of Denmark's central bank, assuming the role from 1 February.  

The year also saw ATP's liabilities increase by DKK37bn, which it was able to offset thanks to the combined return from investment assets and its hedging activities, boosting assets under management by a total of DKK57.5bn.

It said the country's regulator Finanstilsynet calculated its average post-expenses return since 2002 as 8.8%, outperforming the market average by nearly 4 percentage points.

While market average returns since 2002 saw only negative returns in 2008 – compared with negative returns in 2002 and 2007 for ATP – the fund has seen returns above 15% in five of the last 10 years.

The group's annual report also offered the first glimpse of how Now Pensions, ATP's UK venture, is faring, saying the trust-based fund had agreed to act as pension provider to companies with 150,000 employees in total.