Investments at PKA, the DKK195bn (€26.1bn) administrator for five Danish pension funds, generated a 9% return last year, supported by strong returns for quoted equities, the company said.
It said the investment return for 2013 was 9%, or DKK13bn, in absolute terms, but added that, including results from the interest-rate hedging portfolio, the return was 4.2%.
It said buoyant equity markets in 2013 meant the pension fund’s portfolio of quoted shares contributed positively to the overall return, producing a near-22% profit.
Since most of the fund’s equity exposure was passive, it made a return in line with the market return, with very little in costs, PKA said.
The fixed income portfolio produced an “extraordinarily good” return of 9% in 2013, according to PKA, which added that this was particularly satisfying in a market environment marked by big price falls as a result of rising yields.
Peter Damgaard Jensen, managing director of PKA, said: “PKA has consciously maintained and expanded its exposure to Southern European and Irish bonds, as well as Danish mortgage bonds, and avoided investment in Danish government bonds.”
In addition, PKA reduced its sensitivity to interest-rate increases.
It had been able to do this because the pension fund was financially sound, Damgaard Jensen said.
“We have been able to afford to act long term and be cold as ice,” he said.
Absolute return strategies, which had been introduced in the last few years to increase diversification, provided a 13% return last year.
Damgaard Jensen said PKA would increase its focus on investments in green investments.
“We have had good experiences with the offshore wind farms we have invested in up to now, and we expect to undertake more green investments in 2014,” he said.