Danish pensions manager LD Pensions (LD Fonde) says it has started making changes to its investment portfolio in anticipation of a downturn in markets over the next few months.
Lars Mayland Nielsen, chief executive officer of LD Pensions, said: “Our assessment is that the financial markets are moving on a knife’s edge.
“In the US, the central bank continues to pursue a tight monetary policy, which we do not believe has yet fully penetrated the bond and stock markets,” he said.
Mayland Nielsen made the comments on Wednesday as the Frederiksberg-based pensions manager released its interim report.
At the same time, the CEO said, LD Pensions saw clear signs of a slowdown in the growth picture in Europe.
“We have therefore initiated an adjustment of our portfolios in light of expected headwinds on the financial markets in the second half of 2023,” he said.
LD Pensions, whose first-half return figures for the two funds were reported in July, said in the report it expected total assets of the two funds it manages – the Holiday Allowance Fund (Lønmodtagernes Feriemidler) and the Cost-of-Living Allowance Fund (Lønmodtagernes Dyrtidsmidler) – to stand at around DKK20bn and DKK24bn, respectively, at the end of this year.
At the end of June, the two funds had total assets of DKK20.6bn and DKK25.5bn, respectively.
LD Pensions also revealed that over the course of 2022, it had doubled its weighting of credit investments to 27% from 13%, while also increasing the diversification within that allocation by buying high-yield bonds.
“The strategy produced the desired gain in the first half of 2023, when the return on the credit investments turned out to be significantly higher than the return on the safest bonds,” the firm said.
Mayland Nielsen said this had contributed positively to the return on investment for the holiday fund.
LD Pensions described its return expectations for the second half of 2023 as subdued.
“The US central bank is expected to maintain key interest rates at a high level,” it said.
“In Europe, it is clear that growth is on the way down, and in China, the authorities are struggling with a real estate sector that is in crisis,” the firm noted.
LD Pensions is currently in the process of picking an external manager for listed alternatives — a new asset type for the Danish pensions firm.
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