ATP, Hilleroed, Denmark, reported a 26% return on its investment portfolio in 2011, the highest ever in the history of the pension fund, during what was a challenging year for overall financial markets, officials said.
Henrik Gade Jepsen, chief investment officer, said total assets increased to 579 billion Danish kroner ($103 billion) as of Dec. 31 compared to 475 billion kroner a year earlier. One of the key moves that helped the fund was a decision in early 2011 to substantially reduce risk in all areas of the investment portfolio.
“In normal times, we would tend to use up our entire risk budget because we believe we will be rewarded over time,” Mr. Jepsen said in a telephone interview. “During the spring of 2011, we felt the risk was materially higher than normal, so we reduced risk in a balanced way. We reduced equities, index-linked bonds, credit, commodities and government bonds.”
All but one of ATP's risk classes logged a positive return in 2011, with the performance of government bonds accounting for the highest return at 8.7%. The credit portfolio increased by 5.5% while inflation-linked bonds returned 5.5%. The commodities portfolio was also in the black, returning 3.9%. Equities were the only negative asset class, losing 4.2% for the year.
Mr. Jepsen added: “Our risk diversification strategy worked very well in 2011.”