Danish statutory pension fund ATP’s leveraged investment portfolio ended June with a 9.9% loss for the year so far after March’s COVID-19-sparked market crash, but went on to recoup all those losses in the following month, the fund said.
Publishing its report for the first half of this year, ATP said that in a strong second quarter, the multi-asset portfolio – which consists of the pension fund’s bonus potential plus borrowing from the much larger hedging portfolio backing ATP’s guaranteed pensions – had made up much of the first quarter’s investment losses.
Between January and March, the loss on portfolio was 26%.
The investment portfolio’s assets, minus borrowing, shrank to DKK114.4bn (€15.4bn) at the end of June from DKK126bn at the end of last year.
Including the hedging portfolio, ATP’s total assets grew to DKK917.9bn from DKK885.6bn.
ATP’s return for the whole pension fund, according to the Danish FSA’s N1 standard – which is meant to facilitate comparability between pension provider performance in Denmark – was a positive 4.8% for the first half, compared to 16.2% for the whole of 2019.
Bo Foged, ATP’s chief executive officer, said: “H1 has been characterised by intense financial unrest.”
He said ATP’s guarantees had been intact throughout the period, ensuring basic financial security for scheme members, in line with ATP’s purpose.
“Even though the half has ended in the red, I can’t help looking at the development over the summer when the investment portfolio is back in the black for 2020,” he said.
The fund said the year-to-date return for the investment portfolio had reached zero at the beginning of August.
Among asset classes, government and mortgage bonds produced the strongest return in the first half within ATP’s investment portfolio, generating DKK16bn, followed by listed Danish equities with a DKK2.3bn return.
Foreign equities made the biggest dent in the absolute-return portfolio, with a DKK12.2bn loss in the period, according to the interim report.
In its results presentation, ATP revealed that its options-based insurance strategies had resulted in a gain during the six-month period of DKK2bn for the investment portfolio.
The strategies, which consist of options on fixed income and equity products and are designed to protect the portfolio when the unforeseen occurs, worked as intended, ATP said – both in the downward and upward markets seen earlier this year.
Looking ahead, ATP said it expected uncertainty on financial markets to continue for the rest of the year.