More Stellar Returns for Denmark’s Finest

They are doing something right in Denmark – and it’s got a lot to do with managing risk.

(October 26, 2012) — The Danish national pension fund made another impressive quarterly return in the third three months of the year, using its sophisticated hedging and risk management system to combat treacherous markets. 

ATP announced yesterday that it had made DKK41.2 billion ($7.1 billion) in the third quarter of this year, which was equivalent to a 7% return, despite difficult economic conditions. 

The investment portfolio, which is assembled from various “risk buckets” rather than according to asset classes, made DKK10.8 billion ($1.8 billion) over the time frame, drawing on good returns from credit, interest rates, and equities. 

The pension fund’s hedging portfolio made DKK30.3 billion, following the decline of interest rates. 

Henrik Gade Jepsen, CIO at ATP, said, “as a pension provider, we still face an uncertain economic environment with record-low interest rates and turbulent financial markets. This is the background for our conservative investment approach.” 

Jepsen added that ATP had delivered a profit – or positive returns through its investment and hedging portfolios – each quarter of the year. This latest quarter provided the most impressive performance in 2012. 

“This is satisfactory and demonstrates the robustness of our investment strategy,” said Jepsen. 

The sophisticated method of managing assets has seen ATP rarely make losses as its “risk buckets” are designed so that when one asset is underperforming another should compensate by making better returns.

In 2005, it made investment returns of just over 6%, in 2006 around 4.2%, and in 2007, 2%. A 6% loss in 2008 was followed up by a return of 4.3% in 2009 and 6.8% in 2010. Last year, the fund made 20%. 

Both Jepsen and ATP Chief Executive Officer Lars Rohde, who is soon to leave the fund to take over the chairmanship of the Danish central bank, are featured on aiCIO’s inaugural Power 100 – a list of the most influential investors from around the globe. 

ATP is nominated for aiCIO’s annual institutional investor awards, taking place in New York City on December 4. For more information, click here.