The investment portfolio lost 1 per cent during Q1

“In a difficult market, a negative return of 1.0 per cent for the first quarter of the year was satisfactory in light of the very high returns realised in 2017. The result indicates that returns are about to be normalised as central banks place a tighter hold on liquidity and ramp up interest rates,” says ATP CEO Christian Hyldahl.

The negative return relates especially to foreign listed equities and state bonds, while investments in unlisted equities, infrastructure, and real estate contributed positively to quarterly returns.

“We have been blessed with exceptionally high returns in recent years. Our strategy remains to invest and to take risks in order to create returns in spite of the increasing market uncertainties. We do have the margin to do this, but we also keep a keen eye on our risks and the portfolio composition. In this way we expect to create satisfactory long-term results in spite of continuing pressure on returns,” says ATP CEO Christian Hyldahl.

The previous 5 years have realised average investment portfolio returns of 3.9 per cent per quarter. The investment portfolio has realised positive returns in 17 of the previous 20 quarters.

Hedging protects pension guarantees

Hedging of the guaranteed pensions is designed to ensure that members receive the pensions promised, regardless of whether interest rates rise or fall. Due to moderate interest rate drops for European state bonds with long residual maturity, the value of guaranteed pensions increased in Q1. Similarly, the hedging portfolio realised a positive return. All in all, hedging activity results were negative by DKK 1.0bn, corresponding to less than 0.2 per cent of the guaranteed pensions. The hedging therefore worked as intended.

Result for the period

The Q1 result was DKK -1.8bn. At the end of Q1 2018 the bonus potential – ATP’s free reserves – totalled DKK 115.9bn, guaranteed assets were at DKK 652.6bn. ATP’s aggregate assets amounted to DKK 768.5bn.

Facts about ATP

ATP is a mandatory pension scheme with 5,129,000 members. At the end of Q1 2018, 1,039,000 pensioners were receiving ATP Livslang Pension (Lifelong Pension). During Q1, ATP paid out DKK 4.2bn in pensions and lump sum payments. Approximately 40 per cent of all Danish old age pensioners have no other pension income than ATP and the state-funded old-age pension. The full ATP Livslang Pension for a 65-year-old is DKK 23,600. This is equivalent to 32 per cent of the basic amount of the state-funded old-age pension.