ATP Group, Hilleroed, Denmark, returned 5.8% in the three months ended Sept. 30, bolstering assets 0.7% to total 805.7 billion Danish kroner ($121.3 billion).
A financial update published Tuesday showed the investment return was equivalent to 5.7 billion Danish kroner. For the first six months of 2016, the pension fund returned 6.7%, equivalent to 6.9 billion Danish kroner.
For the three months ended Sept. 30, 2015, the pension fund's investments returned -0.2%, amounting to a loss of 240 million Danish kroner.
Assets increased 13.4% for the year ended Sept. 30. For the nine months ended Sept. 30, investment returns were 12.3%, compared with 11.6% for the same period in 2015.
ATP's assets are split into two portfolios — a hedging portfolio made up of long-dated fixed-income securities, which aims to protect the pension fund's liabilities against interest rate risk; and a return-seeking investment portfolio, which takes a risk-parity approach to investment based on four risk factors.
For the nine months ended Sept. 30, the return-seeking portfolio's gains were mainly driven by private equity investments, which contributed 5.3 billion Danish kroner. Fixed income added 3.7 billion Danish kroner; credit contributed 3.5 billion Danish kroner; real estate added 1.4 billion Danish kroner; and listed Danish equities contributed 1.3 billion Danish kroner. The pension fund's allocation to commodities gained 1.2 billion Danish kroner over the three quarters, and infrastructure investments added 1 billion Danish kroner.
Long-term hedging strategies against inflation, however, took 3.7 billion Danish kroner from returns. Losses occurred in three other areas: Listed international equities lost 242 million Danish kroner; “other exposure to inflation” lost 622 million Danish kroner; and other investments lost 273 million Danish kroner.
“We are delighted with how our investment portfolio has performed so far this year, with most asset classes performing strongly,” said Carsten Stendevad, CEO of ATP, in a statement accompanying the update. Mr. Stendevad that while the year-to-date returns have exceeded its forecasts, “we do not expect these high returns to continue given the challenges that Europe, in particular, is facing with weak economic growth, an extreme monetary policy situation where half of Europe's government debt has negative interest rates, an undercapitalized financial sector and the prospects of a hard Brexit.”
As of Sept. 30, ATP's return-seeking investment portfolio had a 49% exposure to inflation factors; 22% invested in interest rate factors; 18% in other factors; and 12% invested in equity factors.