Danish Pension Fund ATP Returns 29.5% in 2017

Fund adds $4.9 billion for total assets of $126.9 billion.

Danish pension fund Arbejdsmarkedets Tillægspension (ATP) returned 29.5% for 2017, adding DKK29.7 billion ($4.9 billion) to its investment portfolio for total assets of DKK769 billion before expenses and tax. The growth  was attributed to strong returns from global equities, and moderate interest rate increases in Europe.

“We achieved an exceptionally solid return in 2017 and generated the best investment return in many years,” said ATP CEO Christian Hyldahl. “The strong performance is due to positive contributions from virtually all asset classes, which has made it possible to increase pensions for all members, while also being able to build up our bonus potential by DKK17.3 billion.”

ATP’s profit for the year was DKK24.7 billion before life expectancy update and increase in pensions. DKK1 billion was transferred to guarantees as a result of increased life expectancies. The fund has earned an 8.1% average annual return for the past 20 years.

Private equity provided a return of DKK5.3 billion, listed international equities generated DKK4.9 billion, while listed Danish equities brought in DKK4.2 billion. The fund’s bonus potential, which is managed in the investment portfolio, was DKK117.7 billion as of year-end 2017.

ATP’s hedging strategy results before the effect of the yield curve break were DKK1.5 billion, or less than 0.25% of the guaranteed pensions. Overall, hedging activity results were negative by DKK1.5 billion due to ATP fixing the interest rate at 3% after the 40-year mark on the discounting curve.  

The fund’s supervisory board raised its long-term performance target to 11% from 7%, which it said was to underpin the objective of preserving the real value of pensions. In 2018, the performance target is equivalent to DKK12.9 billion, which the fund said is a long-term objective, and not one that necessarily will be reached each year.

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