Denmark’s huge statutory pension fund ATP saw gains on its geared investment portfolio slip in 2020, after a year when returns from real estate halved and infrastructure returns tipped into the loss zone.

According to Hillerød-based organisation’s annual report released today, the return on the investment portfolio – which consists of ATP’s bonus potential plus leverage in the form of borrowing from its much larger hedging portfolio – was DKK30bn (€4bn) last year, which it presented as 23.3% of the bonus potential.

Among asset classes in the investment portfolio, government and mortgage bonds produced a DKK15bn return, foreign and Danish listed equities contributed DKK11.9bn and private equity brought in DKK2.8bn, ATP reported.

Real estate, meanwhile, returned just DKK1.2bn, and infrastructure ended the year with a negative return of DKK1.7bn.

In 2019, real estate and infrastructure made positive contributions of DKK2.6bn and DKK2.1bn to the portfolio, respectively.

Bo Foged, the pension fund’s CIO, said the loss on infrastructure was mainly down to its investment in Copenhagen Airport.

“It has been partly closed since March 2020. Even though it’s not fully closed – it is still running on a very low scale – you still incur a lot of fixed costs,” he said.

Overall, ATP made a 10.8% return before pension returns tax, according to the Danish FSA’s N1 standardised figure for pension fund returns on average-rate pensions, down from 16.2% in 2019.

ATP’s total assets swelled to DKK960bn at the end of 2020, from DKK886bn a year before. Within this, its hedging portfolio grew to DKK814bn from DKK760bn and its bonus potential rose to DKK146bn from DKK126bn.

Including leverage, the investment portfolio had a market value of DKK391bn at the end of 2020, up from DKK355bn a year earlier, according to figures in the annual report.

Looking ahead, Mikkel Svenstrup, ATP’s CIO told IPE after a media briefing that the pension fund expected to see increased volatility in investment markets this year.

Asked what ATP expected for investment markets in 2021, he said there were basically two potential scenarios, depending on how work to combat the coronavirus proceeded.

“In reality, it could be the start of a new boom, but there also could be issues for the economy. It’s hard to have a strong conviction for either direction, but one thing I am fairly sure of is that it should be an interesting year,” he said.

In other news from ATP today, the pension fund said it had increased its target for sustainable bonds to DKK50bn for 2021 from DKK30bn – having almost reached the former target in green bonds at the end of 2020.

The asset category is being renamed “sustainable bonds” from “green bonds” previously in order to encompass other types of bond including social bonds, the pension fund said. ATP said it had already made its first investment in social bonds in January, having put DKK95bn into debt issued under the EU’s SURE programme set up to finance the effects of unemployment caused by COVID-19.

“It is not enough for us just to buy these bonds. We are also spending time working with the issuers of these bonds, so our treasury team is going to Frankfurt and other places to discuss best practice around transparency for green and sustainable bonds,” Foged said.

ATP also announced that its chair, Torben Andersen, had been reappointed for a new three-year term by its board of representatives yesterday.

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