DENMARK - PensionDanmark, the €7.3bn Danish pension fund, says alternative investments helped limit the negative returns in the first half.
It posted a -1.5% return for the period, 0.3% better than the strategic benchmark.
High returns on alternative investments, "especially on private equity, real estate and hedge funds", compensated for declining bond prices, said chief executive Torben Möger Pedersen.
Private equity (3.1% of the total assets) returned of 6.4%, while hedge funds (2.8% of assets) yielded 3.4%.
Listed equities combined with private equity, hedge funds and real estate accounts for half of the investments of the Copenhagen-based fund, Pedersen said.
The fund's move into alternatives has been gradual over recent years.
"We started investing in private equity about five years ago and then last year we invested in hedge funds; we have been in real estate for three or four years and it has been going really well," deputy director Jens-Christian Stougaard explained to IPE.
He added: "I think everybody is looking for alternatives in one way or another as everybody is looking for a supplement."
The above-benchmark return was "satisfying in light of the falling bond prices".
PensionDanmark now has more than 500,000 members who are employed in 35,000 private and public companies.
The fund projects steep growth: in the coming years the net inflow of pension contributions will amount to more than €1bn on an annual basis; by 2010 assets under management are expected to exceed €13bn, says the fund.
"That is because the people who are leaving now for retirement have only been members since 1993. When they started entering the fund the pension contributions were only 0.9% of wages, which was of course a very low pension contribution. Because of that they have relatively small pension savings now," said Stougaard.
This will grow very rapidly in the year to come because pension contributions are now in the range of 10.8%.
"The payments in are many times larger than the payments out in these years, because the fund isn't fully mature and won't be for the next 35 to 40 years."