DENMARK - Danish pension providers PFA, AP Pension and PKA all had a good year in 2009 as a result of the rebound in equity markets. The funds returned 6.6%, 8.3% and 12.3% respectively.
PFA, which was one of the few pension providers which managed to create positive returns for 2008, returning 2.8% and improving that in 2009 to 6.6% after expenses.
Investments in Danish equities returned 43.4%, while international equities delivered 31.6% and credit bonds generated a return of 29.3%.
Capital adequacy amounted to 173% compared to 156% at the end of 2008. The fund now has some DKK200bn (€26.87bn) in assets and is the largest commercial pension provider in Denmark.
Aside from traditional guaranteed pensions, PFA also operates non-guaranteed defined option or so-called market rate option. All 31 funds in PFA’s unit-linked offering yielded favourable returns in 2009, according to the firm, and the majority of the equity funds delivered two-digit returns.
In particular, the riskier funds investing in Eastern European and Far Eastern stock markets performed well, as some returned up to 110%. Funds investing in high-coupon bonds and credit bonds also generated high returns of up to 45%.
AP Pension’s return of 8.3% in 2009 clawed back the 6.4% losses suffered in 2008 on its guaranteed pension savings. Its non-guaranteed defined contribution option returned 28.5%.
Thanks to the high investment returns, boosted by equities in particular, the fund has been able to keep the account dividend level that it pays to members at the same level as last year, or 4.7% for 2010.
The firm, which offers both occupational and private pensions, has assets of DKK30bn.
Elsewhere, PKA, a conglomerate of eight occupational pension funds within the public social and healthcare sectors, returned 12.3% in 2009, compared to a loss of 6.3% in 2008 and the combined assets of the funds are now worth DKK118bn.
Equities returned 26.9% and bonds delivered 15.2% on investments. In particular, emerging markets and corporate bonds performed well but other fixed income assets also presented high returns.
Michael Nellemann Pedersen, CIO of PKA, said the proportion of equities held was fairly high throughout 2009, contributing substantially to the total return.
In a separate move, PKA has established a fund together with IFU, the Industrialisation Fund for Developing Countries, to offer micro-loans. The fund is expected to raise some DKK300-500m to be invested in Africa, South and Central America as well as in Asia through microfinancing institutions.
IFU is an independent self-governing fund associated with the Danish Ministry for Development Cooperation. It does not provide aid or business subsidies but instead invests knowledge and venture capital in private-sector projects in developing countries in order to help individuals who want to become self-sustaining through small businesses.
Peter Damgaard Jensen, managing director at PKA, said there are several reasons for PKA’s involvement in microfinancing.
“The primary reason is, of course, that we believe this will have a positive contribution to our total returns. A secondary reason is the UN millennium goal of halving global poverty by 2015. Microfinancing can be a way of reaching this goal and give poor people the opportunity to take a loan, and thereby start a business and improve their living conditions. If we at PKA can make money and at the same time reduce poverty through microfinance, I think our members will be satisfied.”
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