Denmark’s giant ATP pension fund produced a return of 14.5% on its investments last year, helped by a 52% gain on listed domestic equities.

The fund also said it managed to carve out more room for manoeuvre on investments through a major bout of bond selling and other market operations carried out late last year.

ATP’s chief executive Carsten Stendevad said 2013 “was a good year for ATP’s members”.

“We increased pensions for current pensioners and generated a healthy return on our investment activities,” he said.

The ATP Group reported a profit of DKK11.6bn (€1.55bn) for 2013 and distributed a bonus of DKK2.5bn to current pensioners. 

ATP’s investment activities generated DKK12.2bn, equating to a 14.5% return on its bonus potential. 

The profit increased reserves to DKK93bn from DKK 84bn, the fund said. 

All five of ATP’s risk classes ended the year with positive returns, with listed domestic equities producing the highest return at 52%, or DKK6.5bn in absolute terms.

The fund said it worked on its hedging strategy last year, adopting a new discount curve for the valuation of its pension liabilities.

“Consequently, in Q4, ATP engaged in extensive market operations, selling government bonds and other financial instruments subject to an overall interest rate risk equivalent to DKK20bn,” Stendevad said. 

“This reduced our interest rate sensitivity by 25% and enhanced our investment flexibility.”

ATP uses hedging activities to protect its pension guarantees against changes in interest rates.

In 2013, ATP said it made a loss on its hedging portfolio after tax of DKK42.3bn, reflecting the shrinking of guaranteed benefits by DKK42bn – mainly due to the rise in interest rates.

Total group assets fell to DKK677bn at the end of December 2013 from DKK794bn the year before.

Looking ahead to this year’s investment return prospects, ATP said that, despite signs of recovery in the global economy and financial market optimism, uncertainty remained.

“This, in combination with significantly lower payment for assuming risk, means ATP will retain its focus on risk diversification and active risk management,” the fund said.

The overall strategy was to make sure ATP got its fair share of the continued gains in the financial markets, while always being able to meet its guarantees, it said.