DENMARK – Denmark’s financial regulator has come under fire for forcing pension funds to sell shares and miss out on the current recovery in share prices.
The Danish Shareholders Association has criticised the Danish Financial Supervisory Authority (the Finanstilsynet) for forcing pension funds to sell off the shares in their portfolios and preventing them from profiting from the current recovery in share prices.
Claus Silfverberg, director of the Danish Shareholders Association (DAF) in Holte in Denmark, said: “The government regulators have obliged the funds to sell off their shares and this has resulted in a very low ratio of shares in the present portfolio of all the Danish funds. Most are down to between five and seven percent invested in shares.”
Silfverberg said this had meant they were poorly positioned for a recovery in share prices. “This year the Danish share market has come up approximately 35% but the pension funds have not been able to profit from the upturn in the market to any extent because most of their portfolio is invested in bonds, and bond yields have actually been coming down.”
The Finanstilsynet monitors pension funds’ capital strength through a series of stress scenarios – the controversial “traffic lights” system. If pension funds move into the red zone, the regulator can compel them to repair their capital base by selling off equity holdings and buying bonds.
“The rules of the present regulatory regime has the consequence that many pension savings companies do not have a balanced portfolio and they are investing far too little in shares,” says Silfverberg.
“We are naturally very unhappy with that, not only for the sake of the shareholders but also for the sake of the future pensioners.”
The DAF, which has 11,600 individual and 60 company members, promotes shareholding among private investors and lobbies actively on stock market matters.