ATP, Hilleroed, Denmark, returned a net 3.4% on its investment portfolio in the first half of 2018, equivalent to a 4.1 billion Danish kroner ($641 million) gain.
That compared with a 14.6% or 14.7 billion kroner return for the six months ended June 30, 2017. Figures for the six months ended Dec. 31 were not available.
An update Wednesday said the pension fund's assets grew 2% compared with figures as of Dec. 31, and 4.7% for the year ended June 30, to 783.8 billion kroner.
The five-year investment return as of June 30 was 16.1%, and 18% for the three-year period.
Private equity was the biggest contributor to the pension fund, adding 1.8 billion kroner for the first six months of 2018. Infrastructure exposure added 1.5 billion kroner; real estate added 1.4 billion kroner; and inflation-linked instruments added 1 billion kroner. Danish equities returned 631 million kroner, and other investments added 197 million kroner.
International equities had the biggest loss for the pension fund at 2.1 billion kroner; government and mortgage bonds lost 157 million kroner; and credit allocations lost 194 million kroner.
The investment portfolio's asset allocation is split by risk factors. The equity risk factor as of June 30 was 45% of assets, compared with 43% as of Dec. 31. The interest rate factor accounted for 31%, the same as at Dec. 31; and inflation factors accounted for 17% of exposure as of June 30, compared with 18% as of Dec. 31. Other risk factors accounted for the remaining 7% of exposure as of June 30, compared with 8% as of Dec. 31.
"Our balanced investment portfolio has proved resilient in a difficult" first half of 2018, said Christian Hyldahl, CEO of ATP, in a statement accompanying the update. "We have assumed more risk within the framework provided by the supervisory board. We do so based on an extremely disciplined approach to both portfolio construction and risk management as a way of ensuring that we create satisfactory results in the long term despite the low and uncertain return environment."
ATP also runs a hedging portfolio that ensures participants receive guaranteed benefits, regardless of whether interest rates rise or fall. The value of guaranteed pensions totaled 683.9 billion kroner as of June 30, "primarily due to the decline in interest rates in Europe." The hedging portfolio resulted in a 1.8 billion kroner loss. "Thus, the hedging strategy was successful," said ATP's update.