Despite reporting large investment losses for 2022, Danish commercial pension provider PFA has become the largest pension fund in Denmark according to results released this morning – taking the top spot long held by statutory pension fund ATP.

PFA’s total group assets rose, according to its annual report, to DKK736.3bn (€98.9bn) by the end of December 2022 from DKK725.4bn a year earlier, with the new figure now putting PFA ahead of ATP, whose total assets last year declined to DKK677.8bn from DKK947.3bn.

The change in the size ranking is a watershed moment that illustrates the impact of last year’s macroeconomic shifts, and has to do with the big differences between the natures of the two organisations and the way they operate.

ATP’s shrinkage is down to huge losses on its risk-parity investment portfolio on the one hand, and a big decline in the value of the fixed income instruments backing its guaranteed pensions – which have in turn become less onerous as discount rates have risen.

Reporting its annual results today, PFA revealed that on the business side, contributions coming in had increased in 2022 and that it had won twice as many new corporate clients last year as it had managed to attract the year before.

Regarding investments in 2022, PFA reported the overall return for average-rate pensions had been -20.8%, according to the official N1 measure, and 11.1% for market-rate pensions, using the N2 measure.

In its annual report, PFA said: “The return was dragged down by negative returns from both equities and bonds, while alternative investments and real estate contributed positively to the return.”

Currency had also contributed positively to returns as a result of a stronger US dollar, it said, with interest-rate hedging contributing negatively.

PFA’s foreign equities ended the year with a 19.3% loss, according to the report, though Danish equities produced a 5.6% gain over the year, it said. Medical and financial stocks, which had a high weighting in the domestic portfolio, had boosted returns, PFA said.

The solvency ratio contracted to 208% at the end of 2022 from 271% a year before, with PFA blaming this on new rules for Solvency II models and a reduction of the Danish volatility adjustment (VA) addition, among other factors.

But Ole Krogh Petersen, PFA’s chief executive officer, said the firm was working to make sure its strategy and investment portfolios were as robust as possible.

“Here, our broad portfolio of unlisted investments together with a defensive and active asset management strategy and targeted risk management has mitigated the worst of the price declines for our customers in a very difficult and turbulent year on the financial markets,” he said.

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