DENMARK – Returns at Danish pensions administrator PKA rose to 13.7% in 2012 after both equities and bonds produced strong profits.
The return was DKK21bn (€2.8bn) in absolute terms, and up from 2011’s 9.4%.
Michael Nellemann Pedersen, investment director at PKA, said: “All asset classes contributed positively to the result, and that is quite extraordinary.”
Never before had he experienced a time when both equities and bonds delivered such big returns simultaneously, he said.
The favourable financial situation was due to the fact central bankers in China, Europe and the US had flooded the market with high levels of liquidity, he said.
Nominal bonds produced a return of 10.7%, with Southern European government bonds in particular contributing to the profit, with a return of 18.1%.
Nellemann Pedersen said PKA had done well to anticipate that a number of Southern European countries and Ireland were worth investing in, despite the crisis.
“At the same time, we decided to get rid of Danish government bonds, which was a very wise decision,” he added.
Quoted shares returned 18.9%, including a profit on Danish shares of 27.4%.
“We used the favourable conditions on the stock market to restructure our portfolio, so we have better risk diversification and greater flexibility at lower cost,” he said.
In concrete terms, this meant PKA would be more robust and better positioned to achieve good returns, in both good and bad times, he said.
In order to spread risk more broadly and sharpen the focus on its unquoted portfolio – private equity, infrastructure, forestry and agriculture – PKA established the investment company PKA AIP, he said.
The new company had already made several infrastructure investments and started working with a range of industrial firms to promote Danish exports, know-how and employment, he said.
“There are many projects in the pipeline, particularly in infrastructure, which will help us increase our current investments of DKK6bn to DKK16bn in the course of the next few years, not least in PPP projects,” he said.
Meanwhile, labour-market pension fund PenSam made a 14.1% return for customers with unit-link plans and 12.6% on traditional with-profits pensions, according to provisional results for 2012.
This compares with 15.7% in 2011 for ‘Tradition’ with-profits plans and 2.2% for the ‘Fleksion’ unit link product.
Helen Kobæk, director of PenSam, said: “It has been a difficult investment year, with uncertainty about growth prospects and great political uncertainty.”
She said it was therefore satisfying to be able to confirm that PenSam Liv had produced a good return for customers in 2012 as well.
The investment result confirmed that the more active and focused investment strategy decided on in 2010 was bearing fruit, the fund said.
It put the result down to deliberate diversification of risk in combination with risk capacity and willingness to invest in several asset classes – all of which had produced good returns.
Investment director Benny Buchardt Andersen said the increased focus on risk capacity had made it possible for PenSam to invest in shares and credit bonds from the beginning of the year.
“These are the assets that grew the most over the course of the year,” he said. “We have had our eye on the uncertain political, economic and financial situation in large parts of the world, and have therefore spread our investments.”
In other results, Unipension reported higher returns for the three professional pension funds it runs of between 12.8% and 13.3% for 2012.
The Architects’ Pension Fund (AP) returned 13.3% for members, the Pension Fund for Danish MAs, MScs and PhDs (MP) produced 12.8% and the Pension Fund for Agricultural Academics and Veterinary Surgeons (PJD) returned 12.9%.
This compares with 2.9%, 3.8% and 3.3%, respectively, in 2011.
Niels Erik Petersen, head of investment at Unipension, said: “The results are provisional, but does look undeniably good for all three pension funds at Unipension.”
Unipension could once again put money aside for bad years as well as give members a good account dividend of 4.25% after tax, he said.
The previous year’s account dividend was set at 5%.