ATP, Denmark’s statutory pensions heavyweight, reported a slimmer quarter-on-quarter gain from its return-seeking investment portfolio in the third quarter of this year, but its leader expressed satisfaction with performance, particularly given the portfolio’s substantial bond exposure.

In its financial report for the nine months to the end of September, published today, the pension fund revealed its overall assets rose to DKK927.5bn (€124.6bn) from DKK925bn at the end of June, after a DKK6.1bn return on its investment portfolio. This consists of the pension fund’s bonus potential, but not the hedging portfolio.

The latest quarterly return far exceeds the DKK972m loss on the portfolio that ATP suffered in the first quarter of 2021, but is down from the record-high quarterly gain of DKK27.6bn from April to June.

In percentage terms, ATP said the investment portfolio had made a 22.5% return in the first nine months of the year.

Bo Foged, ATP’s chief executive officer, said in the report: “Over the year, we have managed to create very high returns, even though ATP’s investment strategy is bond-heavy. This makes it sensitive to the interest-rate rises, which have characterised 2021 so far.”

As a long-term investor, he said ATP’s focus was to provide its 5.4 million members with the best possible return over many years.

“And seen over, for example, the last five years, our investment strategy has been extremely rewarding for our members – with an annual return of 22% in the period,” Foged said.

Although ATP publishes percentage return figures for its investment portfolio that relate to the bonus potential alone, the market value of the portfolio is in fact far higher than this, because it is geared by borrowing from the much-larger hedging portfolio backing pension guarantees.

At the end of September, the market value of the investment portfolio was DKK440.6bn, compared to the DKK176.0bn of bonus reserves, according to the Q3 report.

This shows that leverage has increased since the end of June, when the market value was stated as DKK423.2bn and the bonus reserves DKK171.7bn.

In its report, ATP said that equities in particular had made a large positive contribution to the investment portfolio’s return, without giving figures for this.

“The investments in inflation-related instruments similarly contributed with a large positive return, which almost outweighed the negative return on government and mortgage bonds,” ATP said.

Looking for IPE’s latest magazine? Read the digital edition here.