The head of Denmark’s huge labour-market supplementary pension fund ATP has highlighted the organisation’s efforts over recent years to improve processes and risk management, saying that work was a big reason it was able to weather this year’s market shock.

In its third quarter report, ATP announced a 3.6% return on its free reserves in the first nine months of this year – bringing the year-to-date return for its leveraged investment portfolio back into the black after losses earlier this year. 

Bo Foged, ATP’s chief executive officer, said: “For many years, we have worked with processes and risk management in a targeted manner.

“This has been a strong contributing factor in allowing us to navigate through the worst crisis on the financial markets in modern times,” he said.

Two months ago, ATP reported a 9.9% first half loss for the investment portfolio, after the 26% negative return for January to March.

The pension fund – which runs a basic scheme covering all workers – said investments in government and mortgage bonds and in listed Danish equities had made positive contributions to returns for the portfolio between January and September, whereas listed international equities had been responsible for the widest losses.

“Even if one should be careful about looking at individual quarters when you are a long-term investor such as ATP, I am satisfied with how we, despite the drastic declines on the financial markets in the beginning of the year, have managed to create positive returns for 2020 so far,” Foged commented.

With the bulk of its resources tied up in the hedging portfolio designed to back ATP’s pension guarantees, the pension fund focuses its results reporting on the return-seeking investment portfolio. This performance is hard to compare with other pension funds in Denmark, since the investment portfolio is made up of ATP’s bonus potential or free reserves plus substantial leverage obtained by borrowing from the hedging portfolio.

Total assets, venture fund investment

The bonus potential amounted to DKK126.7bn (€17bn) at the end of September. Overall, the investment portfolio’s market value including gearing was DKK367.3bn, according to figures in the report.

With the hedging portfolio growing to DKK809.3bn by the end of the third quarter from DKK759.6bn at the end of 2019, ATP’s total assets amounted to DKK936.1bn at the end of September – up from DKK885.6bn nine months earlier.

Separately, ATP also announced this morning that it was investing DKK120m in the country’s first venture fund dedicated to investments in Danish tech startups in the earliest growth phases, launched by PreSeed Ventures.

With ATP and the Danish Growth Fund (Vækstfonden) as the main investors, it said the fund had already secured DKK265bn of investments and would have a strategic collaboration with the Technical University of Denmark.

Mikkel Svenstrup, ATP’s CIO, said: “We believe that the fund can provide a reasonable risk-adjusted return for our members. At the same time, ATP wants to make an active contribution to all parts of Denmark’s financial food chain.”