ATP, Hilleroed, Denmark, returned 7.8%, or 7.8 billion Danish kroner ($1.1 billion), on its investment portfolio in the three months ended March 31, in an “outstanding and exceptional quarter,” said CEO Christian Hyldahl.
The pension fund said in a financial update Thursday that assets fell 0.8% for the quarter, and fell 0.6% over the year, to total 753.2 billion kroner. The pension plan reported an average quarterly return of 5.7% over the past year; 3.4% over the past three years; and 3.7% over the past five years.
Mr. Hyldahl said in a telephone interview that listed and unlisted equities, as well as credit, produced good contributions to overall returns. The largest positive return came from listed Danish equities, adding 2.3 billion kroner, while international equities added 1.5 billion kroner. Private equity returned 1.5 billion kroner, and credit added 1.2 billion kroner. Government and mortgage bonds added 715 million kroner, other inflation exposure contributed 442 million kroner and real estate added 410 million kroner. Infrastructure added 105 million kroner.
Three exposures produced negative contributions. The fund's commodities exposure lost 1 million kroner, other exposures lost 61 million kroner and the fund's long-term hedging strategy against rising inflation produced a negative result of 146 million kroner.
Assets are split into two portfolios: an investment portfolio and a hedging portfolio. Overall, investment and hedging activity returned 6.1 billion kroner, vs. 4 million for the first quarter 2016.
The fund allocates according to risk factors. For the first quarter, its allocations were 49% equities risk, 30% interest rate risk, 13% other riskand 8% inflation risk. That compares to 2016 risk allocations of 49% equity risk, 22% interest rate risk, 18% other risk and 11% inflation risk.
“We are not active in making tactical allocations, we have a very strategic approach. But that being said, we have increased interest rate risk and may still increase” it, added Mr. Hyldahl. He said this risk factor may come from different asset classes, such as infrastructure and real estate.
Regarding the “good contributions” from credit, Mr. Hyldahl added it is “more difficult to see (credit as a) very significant return driver going forward, give credit spreads are quite low. We are in this late cycle, especially in the U.S., and there is a limit to how much you will get going forward on that side.”
