Whatever takes its fancy

Judge’s comment: “An impressive, well-considered approach and response to a changed environment that is not reliant on consultants.”

With some 340,000 members, PenSam was founded in 1986 and covers staff in Denmark’s public health care sector, including nursing home assistants, hospital porters, cleaners and nursery assistants.

PenSam’s preference for active management owes its origins to the crisis years when it realised that  investment was fast evolving. Investors needed to become more active and agile to make the most of attractive new types of investments and styles that were opening up.

As the crisis deepened, PenSam adhered less and less to the belief that the main contributor to returns over the medium to longer term is a strategic asset mix harvesting long-term risk premia using a passive buy-and-hold strategy. Rather, it now argues that long-term returns are the evolution of returns over shorter time periods and that risk premia are ever changing. This means that taking an active approach to add value when prices are at a premium is a more efficient means of optimising returns. PenSam’s philosophy is not to wait passively for many years to discover that performance has been poor because a strategy was wrongly implemented, for instance by buying at the wrong point.

This fundamentally changed PenSam’s strategic asset allocation approach from a textbook long-term buy and hold strategy to a very active investment management model. The central driver of this philosophy is that it takes an active view at all times on markets and the best asset class opportunities at any given time. It no longer adheres to a constant strategic mix but to one that depends on overall goals and the evolution of the risk budget, and to the value of various asset classes.

To run its active management strategy, PenSam has built an in-house team that can rapidly and more efficiently identify opportunities and sources of return. This is considered a fundamental aspect of the scheme’s active investment philosophy. Expected returns form the basis of an optimisation process to determine PenSam’s strategic positions and risk budget.

The fund has also revised its approach to tactical asset allocation. It now pursues tactical tilts to its strategic asset allocation according to continual re-evaluation of long-term expected returns. The easiest asset class to reassess is government bonds, where the expected return matches PenSam’s internal rate of return most closely. This means the scheme’s tactical implementation strategy has also evolved.

Rather than trading one asset class against another to gain short-term exposure, PenSam now considers the investment views of different asset types using an internally developed and managed global macro hedge fund. Trading is in futures and the concept reduces execution costs while improving the speed with which the scheme can react and the flexibility it enjoys to separate equity and bond bets in particular. Tactical reweighting no longer takes place at the gain of one asset class and the expense of another.

Within asset classes, PenSam’s portfolio managers use derivatives to leverage risk factors. True alpha is achieved by understanding the value proposition in each asset class through a mix of systematic exposure to traditional and alternative risk factors and skillful timing.

Tactical asset allocation in alternative assets also differs. Originally, PenSam used a buy-and-hold philosophy for illiquid assets like real estate. However, the fund realised that such alternatives require a degree of active management and the inherent complexity and illiquid nature of property means PenSam can achieve the best results when run by active managers who understand the specific characteristics and opportunities that individual assets offer.

2014 Essentials



Founded in 1986

Hybrid multi-employer pensions company


  • active: 174,000
  • retirees: 81,000
  • deferred: 216,000

Assets: €15.2bn


  • one year: 11.4%

Quick facts:

  • Active approach adds value as an efficient means of optimising returns
  • Continual re-evaluation of assets drives tactical tilts
  • In-house management to ensure swift response to market opportunities


  • Alecta Sweden
  • Bosch Pensionsfonds AG Germany


  • Casper Hammerich
  • Peter Martin
  • Michel Salden