Danish statutory pension fund ATP made a 10.8% return on investments in the first nine months of this year, but its chief executive warned central bank liquidity was still the linchpin for the economy and markets.
In its interim report, ATP said it generated a return of DKK9.1bn (€1.2bn) on its free reserves between January and September, representing a return of 10.8%.
In the same period last year, the giant pension fund produced an 11.9% return.
ATP chief executive Carsten Stendevad said: “When the Federal Reserve held off on QE tapering in September, it triggered optimism in the market, which was also to our benefit.
“This serves as a stark reminder that the global economy and the financial markets remain deeply dependent on central bank liquidity.”
Stendevad described the January-to-September return as good, and attributed it to the fund’s “patient and flexible” investment strategy.
He said it was important to maintain this strategy for the rest of the year to achieve positive returns, given that the global economy still faced considerable risks.
ATP’s total profit was DKK6.5bn for the first three quarters of the year, down from DKK7.8bn in the same period in 2012, and reserves increased to DKK90.4bn from DKK82bn a year earlier, according to the fund’s data.
All five of ATP’s risk classes produced positive returns, it said, with equities coming out as the top performer.
Equities returned DKK7.8bn, boosted in particular by listed domestic equities, which produced a 38.4% or DKK5bn return.
The inflation, interest rates, credit and commodities risk classes returned DKK1.1bn, DKK1bn, DKK600m and DKK400m, respectively, ATP said.
Within inflation – by far ATP’s largest risk class, accounting for 38.1% of the DKK10.9bn investment portfolio – real estate investments and hedging strategies were the drivers of return in the reporting period, the fund said.
Foreign infrastructure investments made the biggest loss.
ATP said it hedging programme made a DKK2.1bn loss over the period, as the allocation of domestic government bonds was higher in the hedging portfolio than in the yield curve used to value pension liabilities.
Total assets fell to DKK705bn by the end of the reporting period from DKK794bn at the end of December 2012.