DENMARK - Danish pension fund ATP now has no foreign equities at all in its investment portfolios, following a risk-slashing move to sell off around DKK20bn (€2.7bn) of the securities earlier this year.
The DKK500bn labour-market supplementary fund chose to offload the foreign shares rather than its Danish equities simply because they were the more liquid.
Chief investment officer Henrik Gade Jepsen told IPE: "We sold the shares around late spring, and it was part of a broader decision to lower the risk of our portfolio."
The fund opted to reduce its risk for several reasons, he said.
"We had signs of a worsening of the euro crisis, and concerns about global growth were increasing," he added.
He stressed that the decision to reduce risk was temporary, so ATP would reinvest in foreign equities at some point.
The stock sell-off had reduced ATP's equity holdings by around DKK20bn, he said.
ATP divides its assets into 'risk classes' rather than separating them according to the type of security.
Across these risk classes, equities were not the only type of security affected by the risk-cutting exercise.
"We reduced risk in a balanced way," Gade Jepsen said.
"It was not particularly an equity call. We reduced risk in all risk classes, so we kept the same relative risk in the portfolio - just at a lower level."
But classic diversification across asset type and geography, for example, was not the most crucial issue, he explained.
"The important thing is that we remain diversified by keeping diversified across the five risk classes," he said.
He pointed out that the geography of equity holdings was not necessarily the crucial factor when markets were unstable.
"In periods of turbulence, all equity markets fall, so the point is - how much equity do you have, not which equities do you have," he said.
"We chose to sell off the foreign stock holdings because they were the most liquid and we could sell them the cheapest.
"But we didn't think it would impair the diversification of the overall portfolio."
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