The chief investment officer of Denmark’s MP Pension has seen light at the end of the tunnel for financial markets, which have been beaten down by pandemic fears, but has warned this brighter spot could take several months to reach.

Last week, the pension fund for upper secondary school teachers and psychologists used a brief window of historically-low stock market prices to close nearly half a billion euros of short futures positions, but said that short-lived risk-taking opportunity has now gone.

Anders Schelde, the Copenhagen-based pension fund’s CIO told IPE: “In volatile markets like these, even long-term investors like us have to navigate the short-term swings in markets.”

With global stock markets having lost a quarter of their value in just four weeks, and COVID-19 contagion curves – outside the US – showing signs of flattening, he said prices had begun to look attractive again a week ago.

“But given the gains we have seen in markets since last week, I am not that bullish anymore,” he said.

“We at MP Pension managed to close our DKK3.6bn (€482m) short in equity futures last week when the market bottomed, and right now we don’t feel compelled to do any more than that,” said Schelde.

Last Monday, the MSCI World Index reached a low of 1602 in US dollar terms – the lowest level seen in four years. But by the end of the week, the index had picked up to 1827.

If markets continued to rise in the next week or two, Schelde said, MP Pension’s investment arm would be more likely to sell risk assets than buy them.

“More likely, however, I believe we will see a rather long period with substantial volatility around the current levels – several months, most likely,” he said.

The slight improvement in the pandemic signalled by the curve-flattening tendency, coupled with all the policy action taken by governments to limit contagion in the last two weeks constituted “light at the end of the tunnel” for investors, Schelde said.

“That light is still there, but the tunnel remains quite long,” he said.

In particular, Schelde said, his team was worried about the development of the pandemic in US.

“News headlines will be truly ugly out of the US in the next couple weeks I fear, and be a real test for investor sentiment. For that reason we believe it is too early to start buying risk assets from a longer-term perspective,” Schelde said.