Denmark’s largest pension fund ATP reported a 13.3% investment loss in the first quarter on its bonus potential, which is managed within a leveraged investment portfolio, as well as losses in other areas.

The statutory pension fund saw its overall assets decline to DKK858.5bn (€115.3bn) by the end of March from DKK948.3bn at the end of last year, according to the interim report published today.

Bo Foged, ATP’s chief executive officer, said: “It has been hard to generate good investments results in the first quarter,” with the war in Ukraine having shaken the whole of Europe and having had a negative impact on stock prices and having sent interest rates higher.

But ATP focused on strong results over time, he said, adding that over the past five years, the pension fund had generated returns on its bonus potential of 18.8% each year.

“And if we look back at the record results of the past three years, it is not surprising that some returns have to be relinquished,” said Foged, who is due to leave ATP at the end of June.

ATP’s assets are now divided into three portfolios – the largest being the now-DKK719bn hedging portfolio backing the scheme’s pension guarantees, and the second largest is the return-seeking investment portfolio consisting of the bonus funds, which amounted to DKK138.5bn at the end of March, plus borrowing from the hedging portfolio.

The third part is the new “life annuity with market exposure” (LAWMA) portfolio, which so far has DKK277m of assets and is new this year because of a major change the pension fund has made to its business model – adding a higher-risk element to a proportion of new pension contributions in order to target higher returns.

Including leverage, the investment portfolio had a market value of DKK402bn at the end of March, down from DKK414bn at the beginning of the year, according to ATP figures.

It was particularly government and mortgage bonds and listed Danish and international equities that dragged the investment portfolio result down in the Janary-to-March period, ATP said in the report, adding that investments in inflation-related instruments had made positive contributions to the return.

Foged said the guarantees of a certain level of benefit that ATP gave scheme members – which include most of the Danish population – were not threatened by a difficult quarter.

“ATP’s finances are very strong, and the political support for our new business model shows that we have now begun to add a little more risk to our investments, and thus we expect to generate higher returns over time, and this will particularly benefit the pensioners of the future,” he said.

The new LAWMA portfolio made a DKK1m loss in the quarter, and the hedging activities resulted in a DKK3.6bn loss in the three months, according to the report.

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Rachel is Nordic correspondent for IPE and has long been a freelance writer. Over the years, she has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, her personal finance book Kickstart Your Money was published by John Wiley & Sons.

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