Top Danish pension funds struggle for investment returns in H1
Two of Denmark’s largest pension funds struggled to generate returns in the first half of the year, according to their interim reports.
PFA, the country’s largest commercial pension fund, reported a slim overall profit on its investments in the first half, leaving some customers with losses.
The total return on investments was DKK838m (€112.4m) in the January-to-June period, down from DKK9.5bn in the same period last year. Total assets reached DKK718bn at the end of June, up from DKK622bn.
Pre-tax market rate returns amounted to between -0.5% and zero, PFA reported, with these figures inclusive of the “CustomerCapital” share of profits that, as a mutual company, PFA passes on to its savers.
Average-rate pension plans received a 0.9% return in the first half, and PFA’s pre-tax total return related to average-rate products was 0.5%.
However, PFA has seen an influx of new business since the end of last year, gaining 237 new corporate customers and 39,000 private customers, according to the interim financial report.
Regular contributions were up 7% from the same period last year, the firm said.
Allan Polack, PFA’s group chief executive, said he was pleased with the results even though the financial markets had been particularly challenging.
“The fact that our contributions are increasing by 7% is great in a mature market and proves that we are able to gain market share and that the customers have confidence in PFA’s ability to generate more value for their savings,” he said.
He said PFA’s increased focus on unlisted assets had proved advantageous in challenging markets. Alternative investments contributed a 1.6% return in the first half, while real estate gained 4.3%.
“This is an area we anticipate will generate high returns going forward,” Polack said.
PensionDanmark ekes out return in first half
Meanwhile, labour-market fund PensionDanmark, which mainly covers blue-collar workers, also described the first half as “challenging”.
The pension fund reported a slight increase in regular premiums, to DKK6bn from DKK5.9bn in the same period last year, and a small positive investment return of DKK1.1bn before tax – translating into a 0.5% gain for 40-year-old scheme members and 0.6% for those aged 65.
The pre-tax return for average-rate products was 0.8%.
The highest contributions to PensionDanmark’s total investment return came from real estate at 4.4%, private equity with 4.2% and infrastructure which generated 2.7%.
Torben Möger Pedersen, chief executive of the Copenhagen-based pension fund, said: “The half-year has been challenging with moderate investment returns close to zero for both equity and bonds alongside with substantial fluctuations, especially in share prices.”
Total assets rose to DKK239.7bn at the end of June from DKK 224.1bn 12 months earlier.
Membership numbers climbed to 721,000 at the end of June, from 705,281 at the same point in 2017.
Möger Pedersen said the 1.9% increase in ongoing premiums indicated “continued positive development in employment for our members”.