DENMARK - Danish industry-wide pension fund Pen-Sam has found applying hedging strategies had a wider negative effect on earlier returns during upward markets, compared with positive gains for rival pension funds.

Details of the €10bn pension fund's results show investment returns for the six-month period to June 2007 in its various divisions ranged from zero to a loss of 3.2%, albeit the scheme stressed all sectors ended the first half with a higher level of capital security despite the tumult on financial markets.

"We kept our hedging instruments against interest-rate falls in a period when rates rose, which naturally had an effect on investment returns," said Claus Asger Olsen, PenSam's finance director.

This is in contrast to better performances for three other Danish pension funds, which all experienced gains on equity investments.

Denmark's Employees Capital Pension Fund, Lønmodtagernes Dyrtidsfond (LD), said members whose pension was invested in its LD Vælger (selector) investment option saw a 1.5% return in the first half of the year.

In its interim report, LD claimed this return was satisfactory given the investment strategy chosen, but the 11.8% of members who had opted to divide their savings between sub-funds saw a slightly higher return on average, it said, mainly because the group as a whole had put a somewhat larger proportion of assets into, mainly Danish, shares.

LD's assets rose to DKK62.06bn (€8.33bn) by the end of June, from DKK61.91bn a year earlier.

The Pension Fund for Education Practitioners in Denmark, PBU Pædagogernes Pensionskasse, also said its investments produced a 2.3% pre-tax return in the first half, while the 85% of members who pay contributions into the new pension package - which allows them to directly benefit in investment returns - saw a 3.2% return on their savings.

These returns were above the benchmark, and PBU said its profit for the first half stood at DKK167m, adding "PBU still expects a positive result for the whole of 2007".

"Interest rates rose in the first half of 2007 by more than PBU expected at the beginning of the year, but the investment strategy remained unchanged," stated PBU in its interim report.

Assets under management rose to DKK30.73bn at the end of June from DKK29.46bn at the end of last year.

And Lærernes Pension, the Danish pension fund for teachers, reported a pre-tax investment return of 2.2%, driven by equities which produced an 8.2% return while bonds resulted in a negative return of -1%.

Asset under management rose to DKK25.61bn at the end of June from DKK23.65bn at the end of 2006.