Danish pension funds LD Funds and P+ said their key pension products have recouped some of their first quarter investment losses, but both funds warn the latest stockmarket bounce may be temporary and advocate a cautious investment approach.

LD Funds – which runs two non-contributory pension schemes – and the pension fund for academics P+ reported 3.8 and 4.3 percentage point recoveries, respectively, in year-to-date returns on their main pension products in April.

They said, however, market volatility could be likely to continue as Denmark and other countries began easing lockdown restrictions in the COVID-19 pandemic.

Kåre Hahn Michelsen, who took over as CIO of P+ two weeks ago, said: “We don’t expect major price declines going forward, but from time to time, the market may still react negatively to bad news so right now we don’t have any appetite for more risk.”

Government aid packages and the coordinated efforts of central banks had been well received by financial markets despite historic market price declines caused by the pandemic, he said.

Michelsen said the gradual reopening of the economy has been reflected in the markets, but said: “We are sceptical of the market’s surprisingly rapid response.”

The DKK130bn (€17.4bn) pension fund P+ was recently formed from the merger of the lawyers’ and economists’ pension fund JØP and engineers’ scheme DIP.

On 30 April, the fund’s P+ Balance pension product had a year-to-date return of -8.4%, which was 4.3 percentage points narrower than the loss reported at the end of March.

Meanwhile pension fund manager LD Funds said the biggest question concerning investors now was whether the global economy would see a rapid recovery or a prolonged recession.

In a commentary released yesterday, the Frederiksberg-based manager said: “Despite the more positive sentiment in stock markets, there is still uncertainty about the scenarios for global growth in the coming quarters.”

LD Funds, which runs the legacy cost-of-living allowances fund Lønmodtagernes Dyrtidsmidler and the new holiday allowances fund Lønmodtagernes Feriemidler, said the global equity index had risen by 24% since the end of March measured in Danish kroner after falling by almost 35% since February.

Fixed income markets had also stabilised as central banks agreed to buy more government and corporate bonds, it said.

The year-to-date return on Lønmodtagernes Dyrtidsmidler’s biggest investment pool LD Discretionary Investments (LD Vælger) was reported at -7% yesterday, compared to -10.8% on 3 April.

LD Funds said for financial markets, much would depend on the degree to which economies could be successfully reopened.

“Companies’ earnings estimates have dropped significantly over the past few weeks, and investors should remain cautious, as further fluctuations in stock markets can be expected over the next few quarters,” it said.

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