ATP, Hilleroed, Denmark, recorded a 23.3% investment return in 2020 despite turbulence associated with the coronavirus pandemic.
The pension fund said in an update Thursday that the return was equivalent to a 29.9 billion Danish kroner ($4.9 billion) gain.
In 2019, the fund's investment return was 39.7%, equivalent to 40.7 billion kroner before taxes and expenses.
The fund's five-year annualized return to Dec. 31 was 20.2% a year.
ATP's assets grew by 8.4% in 2020 to 959.8 billion kroner.
ATP runs an investment portfolio and a hedging portfolio. The combined investment and hedging return was 17.6 billion kroner for the year ended Dec. 31, compared with 29.9 billion for 2019.
The update said government and mortgage bonds contributed the highest positive return, at 15 billion kroner, while foreign and Danish equities added 11.9 billion kroner. Private equity also generated positive returns, although the update did not disclose the value of the return.
Infrastructure, however, detracted from returns, with a -1.7 billion kroner result for the year.
Comparative figures and the asset allocation were not available.
"2020 was, in many ways, an extreme year," CEO Bo Fogged said in the update. "Therefore, I am very pleased on behalf of the members that we end the year with our second best ever annual result after the record result of 2019. COVID-19 caused very significant financial market fluctuations in 2020, and as one of Europe's largest pension funds we have faced a complex and demanding task when navigating extremely turbulent markets. But ATP's investment muscles are toned and fit and we were well prepared."
The update warned, however, the ATP expects to achieve lower investment returns in the years to come as "uncertainty and fluctuations are expected to continue to dominate the markets in 2021."
The Danish Parliament is currently considering a recommendation from ATP's supervisory board to adapt the fund's business model to reflect a longer period of expected low interest rates and returns. A proposed amendment would allow ATP to invest more freely and take more long-term investment risks.
Separately, Danish pension fund PFA Pension, Copenhagen, recorded a 6% increase in assets to 730.1 billion kroner for the year ended Dec. 31. The investment return equated to a 31 billion kroner gain vs. 57.6 billion in 2019. Percentage returns were not available.
"2020 is a year we will never forget," Allan Polack, group CEO, said in an update Thursday. "COVID-19 left a massive mark on the entire year and, at PFA, we had to adapt to a new reality quite quickly. This is why, in many ways, it is extremely satisfying that we are closing out 2020 as a strengthened PFA."