DENMARK - Finanssektorens Pensionskasse (FSP), the Danish pension fund for the financial industry, returned a lower sum compared with pension rivals of 4% on its investments for 2009, but did so as a result of strong investment returns from emerging markets bonds and equities.
Alongside its traditional guaranteed pension fund, FSP operates a defined benefit (DB) option known as WebLink, which allows customers to choose three different risk levels. Members joining after 2007 are automatically enrolled in the DC option whereas those joining before can chose WebLink on a voluntary basis.
Some 80% of members selected the medium-risk option which had a 40% equity and returned 23% for the full year. The higher-risk option with an equity proportion of 70% and returned almost 36% for 2009 while the lower-risk option held 20% equities and returned 15.5%.
FSP focused its attentions in 2009 on BRIC country equities in particular - a strategy which resulted in a 100% return on assets for the year. Danish equities returned between 43% and 53% and corporate bonds and high yield bonds returned between 26% - 41% and fixed income 3%-7%.
FSP altered the asset allocation in the three fund strategies in December by adding unlisted equities and real estate into the medium-risk strategy at the expense of short-term bonds, in order to diversify risk. The medium-risk fund now invests 10% of its assets in real estate and 5% in unlisted equities as a result.
FSP said in a statement that the results for the traditional fund were hampered by the guarantee and various risk provision requirements under Danish law. This resulted in lower-risk appetite which reduced the fund’s ability to invest in equities.
FSP has also outsourced its administration to Forca, a pension administration company, in a bid to advantage of scale. The company provides web-based services to members of several pension funds with members totalling 450,000.
Danish funds have been moving to outsource administration in order to save on costs involved in servicing members, particularly in DC pension plans.