LD Pensions in Denmark has been censured by the country’s financial watchdog for failing to have adequate investment management guidelines regarding certain types of risk, and its board has been ordered to correct aspects of important documentation.
The Danish Financial Supervisory Authority (Finanstilsynet, FSA), said it had carried out an inspection of the DKK46bn (€6.2bn) independent pensions management institution last October, and published a report containing a number of official orders.
The FSA said it found that while LD Pensions’ board did have investment management guidelines containing allocation frameworks calculated on the basis of the board’s accepted risk of loss for the smallest and largest risk-taking, there was no framework for the total market risk or one for the total hedging to Danish kroner.
The watchdog said: “The guidelines also do not sufficiently contain frameworks that limit the concentration of investments in relation to, for example, regions, sectors and individual investments, and limits for credit and counterparty risks for all significant counterparties.”
This entailed a risk of investments being made in conflict with the board’s desired investment risk profile, the FSA said, and ordered the pension fund to set limits for those risks.
LD Pensions also received other official orders, including one for the board to set limits for interest-bearing assets related to risks arising from yield curve changes and credit spreads widening.
The LD Pensions board was also told to ensure it received a complete report on the extent to which the risk limits it set had been utilised both currently and over time, to gain insight into that.
The FSA also said it had found that several comparison bases LD Pensions was using to assess results it achieved were not relevant, for example, where an investment universe was broader than the benchmark it was being measured against.
On its website, LD Pensions – which runs the Cost-of-Living Allowance Fund (Lønmodtagernes Dyrtidsmidler) and the Holiday Allowance Fund (Lønmodtagernes Feriemidler) – acknowledged the orders handed out in three areas resulting from the inspection, but did not comment further.
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Rachel is IPE's Nordic correspondent.
She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere.
In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile
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