Considering the year that was 2011, many pension fund CIOs would have been happy to balance out equity losses with returns in other asset portfolios. This is the situation for most pension funds to report their 2011 results - with diversification able to offset the volatile equity market that for some schemes led to losses of 20% in stock holdings.

However, those results were undoubtedly overshadowed by Denmark’s ATP announcing historically high returns of 26% - the equivalent of DKK125bn (€16.8bn), allowing the scheme to increase its capital buffer by a further DKK4bn and put aside nearly DKK100bn towards future pension payments.

While the scheme still made a loss across one of its five risk classes, namely its equity holdings, investment returns still reached DKK19.2bn, with the remaining DKK107bn profit from its extensive hedging programme.

Danica Pension fared less well, with the organisation forced to withhold DKK1.1bn in profits from its parent company after returns failed to cover the pension guarantees offered by its products. However, despite its unit-linked products returning -2.5%, Danica Traditionel was able to increase its rate of return by 1 percentage point to 6.8% year on year.

Sampension, meanwhile, reported that its with-profit pension plans were able to increase their returns by more than 4 percentage points year on year, leading to its highest-ever return of 20.3%. Similar to ATP, Sampension’s Hasse Jørgensen credited this unusually high return to the scheme’s hedging strategy, offsetting a fall in Danish interest rates.
PKA, responsible for several of the country’s healthcare schemes, saw its returns fall compared with 2010, but still reported returns of 9.4%, with its managing director Peter Damgaard Jensen crediting diversification into infrastructure and agriculture.

PFA Pension’s with-profit pensions, meanwhile, returned 11.3%. Chief executive Henrik Heideby highlighted that the fund had recorded positive returns for the last decade and only one of its asset classes (equities) produced a loss.

Its unit-linked products fared less well, as was the case with Danica, posting returns ranging from -6.6% to 6.1%, depending on risk profile. Group director Anne Broeng insisted the company was “very satisfied” with the performance achieved through the scheme’s approach to active management.

Sweden’s premium pension system AP7 reported a 10.7% loss for the full year, with its default option only faring slightly better, declining by 10.5% over the period.
Schemes in Finland were affected particularly badly by volatile equity markets, with state funds Keva and Valtion Eläkerahasto (VER) posting negative returns of 1.7% and 2.3%, respectively.

Tapiola Pension faced similar problems, with a 17.5% loss on its listed holdings, leading to an overall 3.1% loss - while Keva and VER both had similar double-digit declines in listed equity holdings. CIO Ari Huotari, responsible for public sector worker pensions at Keva, was less optimistic about the outlook for 2012. “In all likelihood,” he said, “the markets will soon reawaken to the many unresolved issues, say, in the euro area.”

Timo Löyttyniemi, managing director at VER, expressed surprise at the scheme’s fixed income portfolio returning 4.1% despite the ongoing euro-zone debt crisis, while his listed holdings swung from returns of more than 23% in 2010 to negative returns of 12.3% a year later.

However, fixed income did not offer stable returns for all schemes, with Ángel Martínez-Aldama, director of Spain’s INREV, attributing returns of -3.1% over the first three quarters of 2011 to fixed income products, “especially to government bonds”. Results for 4Q 11 improved, with schemes only recording a 0.76% loss.

Rounding out the returns announced to date was Austria’s Vorsorgekassen, whose returns fell to just 0.24%, from the average return of 2.58% in 2010. At present, only 10% of the system’s €4.3bn of assets is invested in equity.