Returns in the low single-digits were common across the European pensions landscape in early 2016, as bonds rallied while equities slumped. Susanna Rust looks at the half-year performance of many large Nordic asset owners. 

Nordic asset owners have faced a volatile few months plagued by equity losses, as shown by the half-yearly results announced in recent weeks by pension providers and Norway’s sovereign wealth fund, Europe’s largest.

Returns have ranged from a 2016 half year result of 6.7% at Denmark’s ATP to minor losses such as those seen by Finland’s Varma and Ilmarinen. Many reflect on the impact of the UK’s Brexit referendum, and the resulting uncertainty, although there was little immediate impact following the vote. 

Around a dozen Nordic pension providers have announced interim results, as reported by IPE

A positive contribution to returns from the bond market was a common theme, dragging returns above zero as equities otherwise often produced a loss for many. 

Norway’s sovereign wealth fund, the Government Pension Fund Global (GPFG), announced a 2016 second quarter return of 1.3%, saying that fixed income was the best peforming asset class, and Carsten Stendevad, outgoing chief executive at Denmark’s €107bn ATP, praised the returns from alternatives and bonds – including the listing of DONG Energy – as contributing to the strong return, while Danish equities netted a loss.

Selected pension scheme 2016 interim returns
CountryPension fund/provider2016 interim returns (%)Total assets €bn
  ATP 6.7 107
  PensionDanmark 1.3/3.2 25.4
  PKA 5.6 33.6
  Government Pension Fund Global 1.3 (Q2) 769
  Government Pension Fund Norway 0.4 21.4
  KLP 2.7 47.9
  Oslo Pensjonsforsikring  1.6 8.6
  Etera 1.3 5.9
  Elo 1 20.8
  Veritas 0.9 2.8
  Varma -0.3 41.3
  Ilmarinen -0.6 35.7
  Alecta 0.1/-1.8 77.7
Austria Pensionskassen - average 0.22  
  Pensionskasse Basel-Stadt 1.56 10.3
Notes: The figures for PensionDanmark are for its two main investment fund options. The figure for Oslo Pensjonsforsikring represents value-adjusted profit on customer funds. Alecta returns are for its DB and DC products, respectively.   

The second quarter of 2016 saw the ECB inaugurate its Corporate Sector Purchase Programme (CSPP), with Bank of America Merrill Lynch credit strategists in late June noting the “impressive speed” with which the central bank acted under the CSPP.

”While we don’t think CSPP will act as a cure for credit volatility, we do see it acting as a very effective “pain killer”, just as the outperformance of IG credit relative to equities, post Brexit, has shown,” they wrote at the time.

The impact of the UK voting to leave the European Union was discussed by several asset owners in their interim reports. 

NBIM’s Grade noted the relative market instability - and decline - brought on by the Brexit vote, with variations between sectors in the subsequent recovery. 

A similar analysis was given by some of the Finnish pension providers, with Stefan Björkman, chief executive at Etera, saying that Brexit “did not rattle Etera’s investment portfolio or solvency”.

“The market movement caused by Brexit has not had any greater impact on our investment portfolio than normal day-to-day fluctuations,” he said.

The sentiment was shared by ATP’s Stendevad: “If you had asked before Brexit, we would have expected a negative impact on our portfolio, but the opposite has been true with both stocks and bonds performing better than expected,” he explained.

But not all investors were quite so positive about Brexit.

NBIM cited the “increased volatility and uncertainty” as the reason for writing down the value of its sizable UK real estate portfolio.

Nevertheless, the uncertainty was not enough to deter it from further exposure to the market, as it finalised a deal for a prime asset in the centre of London in the weeks after the UK’s vote