DENMARK - PFA Pension, the Danish life and pensions provider, managed to generate a return on investments of DKK3.5bn (€460m) before tax in 2008 thanks to a major shift towards fixed income holdings, and is now using some of its assets to buy Nordic Asset Management.
Details of PFA's annual results today revealed the firm saw a higher positive return than the DKK2bn generated in 2007, and attributed this to "very tight risk management…in which PFA reduced its share ratio and achieved a very position return on interest rate hedging".
More specifically, the firm lowered its holding in what officials see as risky assets, such as equities, corporate bonds and private equity, over the course of the year from 29% to 13%, to deliver a 28% return on investments.
This was achieved thanks to an 8.5% return on overseas equities - through what PFA said was "great timing and sound management" - alongside a part hedge which yielded DKK2.3bn.
Its investment in equities did lead to a loss of DKK16.6bn on investments, but this was countered by a DKK21bn gain through fixed income holdings.
Alongside details of its gains in 2008, the firm with DKK219bn in assets under management has just announced it is buying Nordic Asset Management.
PFA intends to offer asset management services to institutional investors, including the social security pension fund, so is buying Nordic to tap into that space and achieve economies of scale in the pensions sector, according to Henrik Heideby, chief executive of PFA Pension.
"Our results from 2008 clearly show that we have an excellent investment department. We would like to offer asset management to a number of slightly smaller pension funds, and we can do better if we have an independent company providing asset management," said Heideby.
Speaking on behalf of Nordic, Peter Ott, chief executive of Nordic AM, said the firm would continue to operate with the same team and products, but hoped to gain "significant strength and opportunity" by teaming up with its new owner.
Nordic Asset Management was founded in 2001, serving mainly institutional investors, and now has assets under management of DKK28bn (€3.75bn).
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