Danish occupational pension providers P+, PBU and Nordea have topped a closely-watched independent ranking of market-rate pension returns, taking first, second and third positions, respectively, for 2023.

The analysis from consultant Nikolaj Holdt Mikkelsen showed that in terms of medium-risk profiles for scheme members with a medium-term investment horizon, in 2023 alone, P+ came out at the top with two of its products, P+ Bæredygtig (sustainable) and P+ Lifecycle, returning 18.0% and 16.9%, respectively.

The provider with the second-highest return for the year was Pædagogernes Pension (PBU) with 13.8%, followed by Nordea Pension with 12.7% return for its standard product in the category.

At the lower end of the 18-product ranking, came Industriens Pension with 5.8%, PensionDanmark with 8.5% and PFA Klima+ (climate) with 8.9% – though PFA’s standard market-rate pension product returned 12.1%.

Holdt Mikkelsen commented: “Most asset classes performed well towards the end of the year, but overweight of large cap stocks, credit and loans will have contributed positively to the year’s relative return.”

“Deviations away from MSCI’s global equity index in favour of, for example, small cap, home bias to Danish equities, value stocks or sustainable overlay would – all else being equal – have dragged on performance,” he said.

While liquid alternatives such as private equity and REITs rose significantly in 2023 in the wake of a difficult 2022, he said, pricing in the illiquid market was affected by a lack of write-downs in 2022.

“Hence, return contributions from illiquid investments was modest last year for the Danish pension funds,” the consultant said.

Carsten Warren Petersen, chief investment officer of PBU, which took second place in the ranking, pointed out to IPE that P+, which came out best for two of its products, had a geared portfolio with 140% in assets, while all other providers in the list had 100% of assets invested.

Holdt Mikkelsen responded that several of the pension funds did leverage to some extent.

“Last year was a great year to leverage most portfolios,” he said, adding: “In my view, this is just an investment choice among many other decisions to take, so why shouldn’t P+ be rewarded for this?”.

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