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PKA returns 5.6% in H1 on low interest rates and infrastructure

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Denmark’s PKA, which runs three social and heathcare sector pension funds, has reported a 5.6% investment return for the first half of the year in a period when many pension funds say results have been depressed by weak equities markets.

The DKK250bn (€33.6bn) pensions provider said low interest rates and its infrastructure investments were among factors boosting returns in the January-to-June period.

In 2015, PKA made a 1.7% full-year investment return.

Peter Damgaard Jensen, chief executive, said: “At a time when labour-market pensions on a with-profits (gennemsnitsrente) basis are being declared unfashionable, it is satisfying to note that we have achieved a great result for the first six months.”

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He said he was very pleased with the result in the light of a turbulent period on the financial markets and Brexit.

If the trend seen in the first six months continued throughout the year, it would be a good year for PKA and its members, he said.

In absolute terms, the first-half return was DKK11.1bn.

PKA said the result had been generated by alternative investments including infrastructure, corporate bonds and private equity investments as well as by the firm’s interest-rate hedging activity.

Within fixed-income, emerging markets’ bonds produced a high return, and the real estate portfolio delivered a pleasing ongoing return seen in the light of the low level of interest rates, it said.

PKA said it would continue to focus on alternative investments, and particularly on infrastructure investments such as the recent investment in a biomass power plant in Northern England and co-investments with private equity funds.

This was both because this type of investment made a positive difference environmentally and produced a good return for members, but also because they reduced costs, he said.

“It requires some internal resources, but the benefit is that we save costs on fees to managers by investing directly without compromising on quality with our investments,” he said. 

The three pension funds run by PKA are the Healthcare Professionals’ Pension Fund (Pensionskassen for Sundhedsfaglige); the Pension Fund for Nurses and Medical Secretaries (Pensionskassen for Sygeplejersker og Lægesekretærer) and the Pension Fund for Social Workers, Social Education Practitioners and Office Staff (Pensionskassen for Socialrådgivere, Socialpædagoger og Kontorpersonale).

Combined pension contributions at the three funds rose to DKK3.9bn in the first half of 2016, PKA reported, up from around DKK3.7bn in the same period last year.

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