Quick face lift for an evergreen performer
Judge’s comment: “With strong emphasis on active ownership and social responsibility, this is the best of a very strong set of submissions from Denmark”
With its history dating back to 1917, PFA Pension underwent structural changes in 2014 to ensure it remains at the forefront of an ever-competitive domestic pensions market. The main change saw the previously separate investment management and portfolio administration subsidiaries merged to form PFA Asset Management, which has since been granted a licence to invest in alternatives. Several other units changed their name or structure to further simplify the group under the PFA brand.
Despite mounting competition, PFA Pension’s customer turnover rate remained low in 2014, while its assets under management rose to DKK519bn (€69.6bn) and the return on investments exceeded the DKK40bn mark for the first time, at DKK46.1bn. This outstanding return should be viewed as one in a series of high returns in recent years, with PFA Pension finishing each year among the strongest performing pension companies in Denmark. Viewed against a backdrop of accumulated results over a period of several years, PFA Pension comes out on top.
PFA Pension achieved this milestone by picking the right investment strategy in a number of key areas. Strong returns were recorded for most asset classes, with the extensive domestic Danish equity portfolio doing particularly well with a return of 20.9%. Similarly, PFA Pension’s large bond portfolio and interest hedging contracts also generated high returns. To offset the extra provision PFA Pension needs to find as declining interest rates impact its average interest rate plans, it created extra buffers in 2014, adding a higher level of protection for its members’ future benefits and pensions payments.
Another key development in 2014 was PFA Pension’s continued expansion of its members’ online portal facility that they can access on a PC, Mac, tablet or mobile phone. This provides each member with the ability not only to view the current state of the pensions savings, investment returns and insurance cover but also the opportunity to make adjustments to their plans. This is an area that PFA Pension intends to expand extensively yet further in the next few years.
Elsewhere, the return in 2014 on PFA Pension’s Customer Capital concept was exceptionally attractive. This is the core element of the scheme’s business model and works in a simple way. All members are given the opportunity to gain from the concept by agreeing to transfer 5% of their annual pension total to individual Customer Capital accounts. PFA Pension uses this as a means to boost its own capital base with a guaranteed return for those who participate. In 2014 the assets this generated for PFA Pension totalled DKK29bn and the return amounted to 20%.
As a long term investor with a large asset-base, PFA Pension takes its fiduciary responsibility seriously and recognises its responsibility as a socially conscious and environmentally protective investor. Its policies are thus drafted to comply with many ESG guidelines, conventions and standards, including the six UN-backed Principles for Responsible Investment (PRI) and the Global Compact’s 10 principles. PFA Pension endeavours to avoid contributing to any illegal or convention-violating activities. In partnership with an external specialist in this area, PFA Pension thus screens companies in its equity portfolio accordingly. If its finds that a company’s dealings are illegal, as an active shareholder and responsible investor, it will first engage in a dialogue with it to convince it to change its course of conduct. If this fails, PFA Pension will ultimately divest its holding. Indeed, opening dialogue and pursuing a policy of active engagement remains a cornerstone of PFA Pension’s policy and success as a socially responsible investor and it believes this has a wider benefit by underpinning and optimising its long-term investment returns.
Founded in 1999 (current form)
Hybrid arrangement multi-employer pensions company
- active: 1,000,000
Performance as a percentage:
- one year: 13.1
- Streamlined group restructure creating one central asset management team
- Innovative supplementary plan with a 20% return in 2014
- Focus on active engagement and ESG policy to underpin long-term returns
- Industriens Pension