Lærernes Pension, the Danish pension fund for teachers, reported a 2.1% return on investments last year, down from the 12.6% produced in 2014, with most asset classes performing more weakly than expected, according to the fund’s annual report.

In absolute terms, the investment return fell to DKK1.4bn (€188m) in 2015 from DKK7.2bn in 2014.

The pension fund said 2015 had been marked by big swings on the financial markets.

In the report, the labour-market scheme said: “Lærernes Pension achieved a very high return on its holdings of Danish equities and on its real estate investments. But returns on the majority of other asset classes were more modest and lower than expected.”

It said this was particularly the case for foreign shares, including emerging markets equities, high-yield bonds and timber land.

The investment portfolio’s rate of return amounted to 1.2%, compared with an expected long-term rate of 5.2%, according to the investment strategy, the pension fund said.

Total group assets grew to DKK88.1bn at the end of December 2015 from DKK82.0bn 12 months before, and solvency coverage rose to 316% from 311%.

Contributions rose to DKK4.8bn in 2015 from DKK4.5bn the year before.

The interest rate paid on pension savings (depotrente) after pensions tax rose to 5.5% from 3.75%.

Lærernes said its supervisory board had approved its investment strategy for 2016 to 2020 in December.

The new strategic investment portfolio had an expected return of 5.2% before tax and a risk level of around 23%, measured against a confidence level of 99.5%.

It explained this meant that, statistically, there was only a 0.5% probability the investment portfolio would suffer an unexpected loss of more than 23% in the course of a year.

Lærernes said the new investment strategy meant the pension fund would increase the proportion of its investments in alternative asset classes over the next few years, including property, private equities, forestry and infrastructure.

To ensure costs are kept low, it outsourced a large part of its portfolio management to external managers.