DENMARK - Danish labour market pension scheme PensionDanmark beat its benchmark with a 2.6% return on investments for 2007, thanks to strong performances from private equity and real estate, but officials admit returns in January have been hit by market turbulence.
Assets under management rose nearly 14% from a year earlier to around DKK70bn (€9.39bn) at the end of 2007, but the scheme has made a loss of 1.5% on investments so far this year, according to officials.
"The return reflects the fact that the global equity markets have fallen by more than 10% since the New Year," PensionDanmark said.
But on the other hand, it added, long bond yields have fallen by 0.5% in January, boosting bond prices and having a positive impact on the scheme's overall investment return, it said.
Commenting on the 2007 figures, managing director Torben Möger Pedersen said: "PensionDanmark achieved an investment return of 2.6% before tax. In relation to the benchmark that the investments are compared with, there was a surplus of 0.9 percentage points, which is satisfactory," he said.
Of all the various asset classes, investments in private equity and real estate produced the highest returns in 2007, giving 19.4% and 11% respectively, the scheme said. The return on property was helped by the completion of residential projects in Ørestad and Ballerup in the Copenhagen region, which the fund said made it a combined profit of more than DKK150m.
Investments in quoted equity finished the year with a return of 5.4%, which was also 1.7 percentage points above the benchmark.
Claus Stampe, chief investment officer, said: "The excess return is particularly due to the fact that the equities portfolio contained overweight positions in companies that benefited from the continue high level of economic growth in emerging markets, as well as the rise in oil prices and other commodities during the year."
PensionDanmark said, overall, the active management of the different asset classes had been responsible for 0.6 percentage points of the above-benchmark portion of the return.
Bonds returned 1.3% for the year, it said, after significant price falls on the bond market, but still beat the benchmark by 0.4 percentage points.
Holdings of index-linked bonds ended the year with a negative return of -8.1% - in line with the benchmark - but the fund said it was set to receive government compensation.
"The negative return is mainly due to changes in the pension taxation law, which led to significant fall in the price of index-linked bonds," it said.
As a result of this change, the Danish parliament has decided the state will pay compensation in 2008 to those pension scheme members affected by this, it said.
"For PensionDanmark's members, the compensation totals DKK470mn," said the fund, adding if the pension fund's overall return were corrected to include this, it would life returns by around 0.7 percentage points.
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