DENMARK - Bankpension, the pension fund for employees in the Danish financial sector, has reported an “extremely unsatisfactory” result of -23.1% before tax in 2008.
Figures from the pension fund’s annual report for 2008 showed the net return was -19.7%, and the return on investments - before currency and interest cover - comprised 38.9% from core shares, 6.9% on core bonds and -37.2% in alternatives.
Bankpension confirmed its overall reserves declined from 26% to 11.4% by the end of 2008 following the negative return, and it reported a net loss of DKK219m (€29.4m) in the year even though the number of paying members increased from 10,972 to 11,196 and ordinary gross income rose to DKK684m from DKK614m.
The annual report stated the return was “extremely unsatisfactory” and was the result of “extremely negative returns on credit products and stock, causing net returns of -21.3% for investment profiles one - which has an unconditional guarantee - and two, while profile three yielded -7.9% and profile four returned -32.24%.
Looking ahead, the report noted the level of activity is expected to remain unchanged in 2009, although Bankpension admitted it expects an investment yield “close to zero” for the year as “expectations are extremely uncertain, since we now assess that there is not inconsiderable risk of a deep recession and considerable price decreases”.
The DKK10.9bn (€1.46bn) pension fund also confirmed “the overall investment strategy remains unchanged from 2008”, although it highlighted the acquisition of additional interest rate options to hedge against further interest rate decreases” while it is also planning to change the asset composition of the scheme’s investment profile one. (See earlier IPE article: Bankpension to hedge guaranteed profile)
Bankpension also revealed the board of directors will continue to focus on the pension fund’s long-term reserve situation in 2009, following the impact of the financial losses in 2008.
It stated: “The overall strategy continues to be to strive for the maximum financial space for manoeuvre to have a large proportion of risk-weighted assets such as shares and private equity.”
It said the Board will consider issues including “an increased contribution to build up reserves, reduce guarantees and altered rules for charging bonuses including pension supplements”.