DENMARK - Holdings in emerging markets and corporate bonds boosted investment returns for the market-linked pensions of Denmark’s Finanssektorens Pensionskasse (FSP), the fund said, reporting strong third quarter performance figures.
Alongside its traditional with-profits pension plan, FSP - which provides pensions to financial sector staff - operates three risk-ranked “WebLink” market link profiles for customers to choose between. In the first nine months of this year, the low-risk profile had returned 13.3%, the medium-risk delivered 19.2% and the high-risk strategy returned 31.1%.
In the third quarter the returns were 6.8%, 8.9% and 12.5% respectively which means customers in the unit-linked plans reaped almost as much return in the third quarter alone as they saw the entire first half of this year, said FSP.
The high levels of return were achieved largely on the back of emerging markets equity investments, primarily in Latin America, Eastern Europe and Asia. Among other investments, the Sydinvest BRIK (Brazil, Russia, India and China) fund, which is included in the high-risk profile, has risen by over 80% since the beginning of the year, said FSP.
Portfolio Manager Michael Dyrlund said FSP had recently decided to sell and take its profits in this fund. “We judged that BRIK shares prices have been pushed to high levels, with a high risk of corrections. We invested in European shares instead, where we think there is still potential for price rises,” he said.
Corporate bonds have also done well for FSP as the firm sold short-term bonds in April from all three WebLink profiles and bought more corporate notes.
“The financial crisis has made it hard for many businesses to borrow money from banks. So companies are issuing bonds to get the money for investments and operations,” continued Dyrlund, who noted that corporate bonds were riskier than traditional bonds but yields were higher.
In the last three months, corporate bonds have delivered returns of 10% while short-term bonds only produced 1%, according to FSP.