ATP, Hilleroed, Denmark, returned 29.5% on its investment portfolio in 2017, buoyed by listed and private equity exposures.
Assets grew 1.2% over the year to 768.6 billion Danish kroner ($123.6 billion). The 2017 return, equivalent to 29.7 billion kroner, compared to a 15% or 15.3 billion kroner return in 2016.
"It is an exceptional result," said CEO Christian Hyldahl in a telephone interview. "It's driven by all parts of our portfolio. (What is) unusual about it is even though we focus on creating a very diverse portfolio, it seems like all parts have been correlated in that everything is contributing to the returns. When you stack everything up, it becomes a large number."
Private equity exposure added 5.3 billion kroner, international equities added 4.9 billion kroner, and Danish equities and inflation-related securities returned 4.2 billion kroner each. Credit added 3.6 billion kroner, government and mortgage bonds contributed 2.7 billion kroner and real estate added 2.5 billion kroner to the investment portfolio. Infrastructure added 2.3 billion kroner and other exposures added 473 million kroner. ATP's long-term inflation hedge lost 349 million kroner.
The fund's investment portfolio allocation is split by risk factor. Equity risk factors accounted for 44% of the portfolio as of Dec. 31, compared with 50% the previous year. Interest rate factors accounted for 32% of the portfolio, up from 25% as of Dec. 31, 2016. Inflation factors made up 15% of the portfolio, up from 9%, and the remaining 9% of the investment portfolio was exposed to other risk factors, down from 16% as of Dec. 31, 2016.
Mr. Hyldahl said executives have reduced exposure to equity risk but remain overweight its target of having a balanced portfolio across the four factors. While executives are "quite certain that rates will go up, (we) don't want to be without interest rate exposure as that is the insurance in the portfolio for something going wrong."
