Investments at statutory Danish pension fund ATP returned 9.4% in the first half of this year, and increased group profits to DKK7.7bn (€1bn) from DKK1.3bn in the same period last year, as equities produced strong gains and hedging losses narrowed.

The return from the investment portfolio was double the 4.7% generated in the first six months of 2013.

One of the biggest institutional investors in the world, ATP saw its group assets increase to DKK640.7bn at the end of June from DKK592.5bn at the end of December.

Carsten Stendevad, chief executive of ATP, said: “Virtually all the markets that ATP invested in posted gains, and our active trading strategies also proved successful.”

Looking ahead, though, he said it was worrying that many investors were willing to take on ever greater risks in exchange for a still smaller expected return.

“We therefore remain very focused on risk management,” Stendevad said.

In absolute terms, ATP’s investment portfolio made a DKK8.8bn return in the first half, before tax and expenses, compared to DKK4bn.

Out of the five risk classes within its investment portfolio, equities produced the highest return at DKK6.9bn, with listed Danish equities generating a return of DKK3.2bn.

Unlisted equities returned DKK2.4bn, and listed global equities returned DKK1.3bn, which the pension fund said was one of the largest contributions that category had made to its overall investment returns for several years.

Private equity — which at DKK30.8bn in assets makes up nearly half of the DKK63.3bn equities portfolio — produced a return of DKK2.4bn in the six-month period.

“The return was achieved broadly across the portfolio thanks to high sales activity and positive earnings and debt repayment trends in underlying portfolio companies, underpinned by positive developments in the valuation of comparable listed companies,” ATP said.

The equities, interest rates, credit and commodities risk classes all made positive returns in the first half, while inflation posted a loss of DKK1.4bn.

Within this latter risk class, ATP said properties and infrastructure investments had made profits but that insurance strategies against interest rate increases had made a DKK3.3bn loss, mainly because of falling yields on long-dated European bonds in the reporting period.

ATP’s hedging portfolio of bonds and interest-rate swaps — which makes up the bulk of the pension fund’s assets — produced a return of DKK51bn in the first half as a result of falling interest rates.

The fund said its guaranteed pension liabilities increased correspondingly — which it said meant the portfolio had served its purpose of protecting guaranteed pensions from interest rate fluctuations.

After tax, hedging activities made a DKK741m loss in the period — less than half the DKK1.5bn loss reported for the first half of 2013.