Denmark’s PFA reported an investment return of DKK24.7bn (€3.3bn) for the first half of the year, bouncing back from the DKK4.9bn loss it booked in the same period a year ago, with results boosted by a high proportion of foreign bonds.

The results came as PensionDanmark also published half-year results that saw investment income for the first six months outstrip income from all of 2013.

PFA, the commercial mutual pensions provider said: “This year, PFA obtained its historic high return based on its successful interpretation of the markets on several fronts.”

The provider has explained the loss recorded in the first half of 2013 by saying it had not recognised the operational risk charge due to the increase in interest rates during the reporting period.

In the first half of this year, the bond portfolio produced around 5% in return, PFA said.

“This was particularly due to the foreign bonds, which represent a total value of well over DKK100 billion in the portfolio,” it said.

Overall, assets dipped to DKK411.2bn at the end of June from DKK417.5bn at the end of December.

PFA said the gains in foreign bonds were mainly due to its exposure to emerging markets and underlying, strong-performing portfolios, which yielded almost 7% during the first six months of 2014. 

On top of this, the falling level of interest rates during the first half had led to positive returns on bonds and interest rate hedging, it said.

Equities returned around 9.5%, it said, mainly due to the focus on Danish shares, which increased by more than 20% in the period.

Alternative investments had grown by more than 10% in the first half, it said, adding that it was increasingly investing in non-listed companies now.

Property generated around 4.3%, it said.

The pension provider’s investment returns translated into a return of between 5.5% and 7.5% for customers with unit link pensions, compared to an average rate of 2.3% in the same period last year, according to the interim report.

Customers with traditional with-profits pensions would get an 8.0% return compared with a 2.2% loss in the first half of 2013.

Meanwhile, labour-market pension fund PensionDanmark posted a first half return of DKK9.9bn —higher than the entire 2013 return of DKK9.1bn, and beating the DKK2.2bn return generated in the first six months of last year.

The 2014 first half investment return led to scheme member returns of between 6.5% and 6.6%, the pension fund said, adding that these returns had increased since the end of June to 8.3% and 8.4%.

Torben Möger Pedersen, chief executive of PensionDanmark, said: “This is a satisfactory result, which reflects the fact that there have been positive returns on all asset classes.”

He said it was unusual in markets to have rising equities prices and falling interest rates at the same time.

“We are trying to put together a balanced portfolio that can do well both when the sun shines and when it rains,” he said.

Contributions had increased in the January-to-June period to DKK6.8bn from DKK5.2bn, PensionDanmark said, boosted mostly by DKK1.8bn of transfers from other pension funds due to job changes.

Total assets increased to DKK165bn at the end of June from DKK152bn at the end of December.