Denmark’s Sampension reported first quarter returns on its market-rate pensions of up to 6.78%, saying factors such as an underweight in US treasuries as well as low exposure to large growth stocks had played to its advantage in the period.
The pension provider revealed returns for its market-rate pensions of between 0.95% and 6.78% between January and March, depending on customer age and chosen risk level.
Henrik Olejasz Larsen, Sampension’s CIO, said: ““Returns have benefited from continued rising stock markets. At the same time, there have been good returns on private equity once more.”
On the other hand, he said, bonds had generally made losses because of a rise in interest rates during the period, especially in the US.
But Sampension said that compared to the broad market, it has been an advantage for its portfolio in the first quarter that the market’s largest growth stocks had not performed so well – because Sampension’s portfolio was less exposed to these stocks.
“On top of this, our bond investments have avoided some of the price falls that an allocation to the general market would have produced,” said Olejasz Larsen.
Sampension’s bond portfolio performed better than the benchmark, he told IPE, partly because of its overall lower interest-rate risk – when interest rates by and large rose in the first quarter.
It has also benefited from an underweight in US treasuries, at a time when longer US-dollar interest rates rose more than comparable euro interest rates, he said.
Sampension said the big rises in interest rates seen in March affected both long and short-term bonds – except for the very shortest, where yields on European and Danish bonds alike fell slightly.
“This development reflects the market’s assessment that the coronavirus pandemic is finally approaching the end,” Olejasz Larsen said.
Looking ahead, he cited positive factors for markets such as the reopening of local economies as vaccines were rolled out, and US President Joe Biden’s aid package.
But he warned financial markets could continue to be turbulent if it was not possible to vaccinate the population quickly enough to overcome the spread of infection or new virus mutations.
“So you will continue to see strong reactions in the financial markets when there is positive or negative news,” the CIO said.