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IPE special report May 2018

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Infrastructure and US push Industriens' 8.2% 2016 return

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Industriens, the Danish pension fund for industrial sector workers, posted an 8.2% return on investments for 2016 – boosted by rallying US equities and bonds.

The return compares to a 6.7% gain in 2015. Industriens said half of last year’s return had been generated by holdings in infrastructure and American securities. Overall, these investments contributed DKK5.5bn (€741m).

Laila Mortensen, chief executive of the pension fund, said: “We are committed to making sure we have the best risk diversification and have increased our investments in infrastructure and corporate bonds.”

She added that these two asset classes added DK3.7bn to last year’s total return, and now accounted for 11.4% and 14.6% of Industriens Pension’s investments respectively. 

Mortensen said the pension fund was very pleased with the 2016 result, even though it was more concerned with long-term returns. Over the past 10 years, the fund produced an annual average return of 8.4%.

Industriens has DKK35.8bn invested in corporate bonds – 24.1% of the overall portfolio. Of these holdings, high yield bonds produced a 14.8% return last year, investment-grade bonds gave a 4.4% return, while emerging market bonds generated 11%, the pension fund said.

However, equities – in which Industriens has DKK42bn invested – ended the year with very different levels of return coming from different geographical regions, the pension fund said.

Danish shares produced a “modest” 3.2% return, it said, but noted that this had come after three years when the average annual return for these investments had been 30%.

European shares produced a return of just 0.3% last year, while shares outside the region generated 13.2%, it said.

Unlisted shares in businesses, infrastructure assets and property – which make up 26.9% of the overall portfolio – produced a “significant contribution” to the fund’s total return for last year, Industriens Pension said. The highest return came from infrastructure assets: 11.4%.

Industriens Pension’s total investment assets increased to DKK150.8bn at the end of 2016 from DKK137.7bn at the end of 2015.

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