The first half of 2019 proved a fruitful one for many of Europe’s biggest pension funds, despite ongoing market turmoil and political uncertainty.

The Netherlands’ giant healthcare scheme PFZW and metal industry fund PMT led the way with gains of 12.7% each – although the strong returns have done little to improve the schemes’ funding levels and they both remain at risk of having to cut member benefits .

Investors in Icelandic pension fund Frjalsi’s main risk profile had an even better first six months of 2019, however, with a return of 13.6%.

Dutch construction fund BpfBouw and civil service scheme ABP also posted double-digit returns. Customers of Denmark’s Danica Pension experienced strong growth too, with those invested in the Danica Balance Mix fund with a medium risk profile and 20 years to retirement having gained 12.1%.

FundCountryAssetsH1 return (%)Notes
Frjalsi Iceland €1.7bn 13.6 Return is from main risk profile. Assets as of 31/12/18
PFZW Netherlands €225bn 12.7  
PMT Netherlands €80.5bn 12.7  
BpfBouw Netherlands €63.5bn 12.5  
Danica Pension Denmark €60.4bn 12.1 Return refers to Danica Balance Mix, medium risk, 20 years to retirement
Alecta DC Sweden €83.9bn 11.8 Assets include both DB and DC sections
ABP Netherlands €442bn 10.9  
AP1 Sweden €32.8bn 9.7  
Alecta DB Sweden €83.9bn 8.5 Assets include both DB and DC sections 
AMF Sweden €13.1bn 8.1  
KPA Sweden €17.8bn 7.7 Assets as of 31/3/19
Industriens Denmark €24.1bn 7.6  
Ilmarinen Finland €47.8bn 6  

Johan Sidenmark, chief executive of Sweden’s AMF, said his fund’s 8.1% return for the first half was aided by strong equity markets in particular.

The S&P 500 gained 18.6% in euro terms in the first six months of 2019, while the MSCI Emerging Markets index rose by 11% and the MSCI Europe index gained 16.2%.

Fixed income benchmarks also rose during the period, with the Bloomberg Barclays Global Aggregate index gaining 6%.

Johan Sidenmark, AMF

Johan Sidenmark, AMF

However, Sidenmark warned that “it should be borne in mind that the upturn is partly due to signs of a weaker global economy leading to expectations of a less tight monetary policy”.

“Dark clouds in the form of an escalating trade war, Brexit and other turmoil continue to rise on the horizon,” he added. “That is why it feels good and important that during the spring we have taken important steps to be able to achieve a competitive return even in a tougher economic situation.”

Finland’s Ilmarinen also highlighted “the state of Italy’s public finances and the development of the political situation between the US and Iran” as creating uncertainty for investors and the global economic growth outlook.

In its interim report – which revealed a 6% investment return for the first half – the €47.8bn pension insurance company said monetary policy also remained a key influence on performance.

Tine Choi Danielsen, PFA Pension

“The central bank is like a shark in the water, ready to attack any negative news, and it is difficult – and maybe stupid – to fight against it”

Tine Choi Danielsen, PFA Pension

“Returns offered by different asset classes and the compensation gained from additional risks are at an historically low level,” the fund said. “A low interest rate environment pushes investments towards riskier and less liquid investment objects, favouring [for example] the equity and real estate markets. The development of the equity markets is strongly conditional on the central banks’ expansionary monetary policies and on companies’ earnings growth remaining high.”

Denmark’s PFA – which posted a 10% gain for investors in its “recommended” ‘C’ investment option – also highlighted the importance of central bank policy. On the eve of the US Federal Reserve’s decision this week to cut its key policy rate by 25bps to 2-2.25%, PFA chief strategist Tine Choi Danielsen said a safety net had been placed under the stock market.

“The Fed has kicked the door wide open for interest rate cuts and has also left us investors with every reason to believe that if there is gravel in the machinery, whether it is from the US economy or something global, then they are ready to stimulate,” she said.

The central bank is like a shark in the water, ready to attack any negative news, and it is difficult – and maybe stupid – to fight against it.”