The CIOs of Denmark’s two largest commercial pension providers – PFA Pension and Danica Pension – have expressed varying degrees of positivity about the progress of financial markets after publishing double-digit first half returns for their highest-risk product profiles.
PFA announced its main market-rate product ended the first half of this year with returns of up to 11.5%, depending on age and risk profile, with its climate-tilted counterpart PFA Climate Plus generating up to 12.2%, while Danica Pension reported market-rate product returns of up to 13.1%.
Kasper Ahrndt Lorenzen, PFA’s Group CIO, said in a video commentary put on the provider’s website yesterday: “What’s happening now is that the global economy is back on its feet, vaccinations are being rolled out and there are big investments being made in the green transition.”
The DKK466bn (€62.6bn) Danske Bank subsidiary Danica Pension reported a return of 9.6% for customers with its Danica Balance Mix product, for a customer with a medium-risk profile and 20 years to retirement, with its CIO expressing cautious optimism about the second half of this year.
Poul Kobberup, Danica Pension’s CIO, said in a written commentary published by the firm yesterday that stock markets had been strong throughout the first six months of 2021, with interest rates rising and then falling.
“Our private equity portfolio contributed to positive returns, and here we have reaped the fruits of the investments we made about five years ago,” he said.
In the last three years, he said, Danica’s medium-risk market-rate pension product had returned 36% for a customer with 20 years to retirement, but he warned that such high returns could not be expected over the next few years.
Economies were reaching a point where they were in top gear, and markets had already taken this into account, he said.
“We are sticking to our long-term strategy and are moderately positive, as we expect a great reporting season,” Kobberup said.
The behaviour of central banks would now be crucial, he said.
“Until now, there has been a consistent resolve in maintaining low interest rates, and it will be very interesting to see if it continues like this, given the speed the economies are currently at,” he said.
Meanwhile the CIO of PFA – which had total assets of DKK730bn at the end of last year – said inflation and interest rates had risen in the first six months of 2021, which meant equities and equity-like exposures had done better than bonds, for example: “And that is something we will keep an eye on,” Ahrndt Lorenzen said.
He also lauded the success of PFA Climate Plus, which had now been up and running for over a year.
“The first half was another example of how good returns can easily go hand-in-hand with work on the green transition,” he said.