DENMARK - The Danish Industriens Pension posted a 7.7% investment return for 2006 before tax, bringing its total assets up to DKK43bn (€5.7bn) from DKK36.5bn in 2005. This contrasts with the funds 17.3% return for 2005.

Returns on domestic equities were lower down than the high levels witnessed in 2005, and this was the main reason for the fund's lower investment return, said Henrik Nohr Poulsen, head of equities at the collectively-owned retirement fund for industrial workers.

"If you look at alpha generation, we have done well both in 2005 and 2006, but market returns have been lower last year," he said.

Stripping out the effect of strategic interest rate hedging, the investment return was 8.8% before tax, the pension fund pointed out in its annual report.

"The result is very satisfactory, and is 2.4 percentage points above the set benchmark," it said, attributing the outperformance to tactical asset allocation as well as good results from the portfolio managers.

In the course of last year, Industriens Pension cut its exposure to domestic nominal bonds slightly, correspondingly raising the weighting of foreign bonds. At the same time, it reduced the proportion of high-yield corporate bonds, and lifted exposure both to foreign equities and private equity.

The fund has gradually increased its private equity weighting to 4% at the end of 2006 from 3% the year before. The strategic asset allocation for the asset class stands at 5% for both 2006 and 2007. Nohr Poulson said the fund was still actively considering investing in emerging market private equity, although it had yet to make a move.

For 2007, the fund forecasts a pre-tax investment return of DKK2.2bn, based on the assumption that bond yields and equity returns remain broadly unchanged. In 2006, pre-tax investment return was DKK2.8bn.

Administrative costs totalled DKK367 per member, the fund said, adding that this meant Industriens Pension continued to be among the cheapest and most effective organisation in the pensions industry.