ATP, Denmark’s biggest investment fund with 794 billion kroner ($144 billion) in assets, said the global economic outlook remains too bleak to justify swap low- yielding Danish government bonds for riskier assets.
Higher-yielding assets don’t provide enough in risk- adjusted returns to make them attractive for ATP, Chief Investment Officer Henrik Gade Jepsen said today in a Copenhagen interview.
ATP holds only German and Danish government debt after renegotiating contracts in October 2011 to avoid having to accept French sovereign bonds as collateral for funding. The government bond portfolio returned 2.28 billion kroner last year and was worth 124.6 billion kroner at the end of December, the pension fund reported today.
“You’re not getting paid a lot, but you also need somewhere to put your money,” Gade Jepsen said. “It’s a way to protect your principal.”
Danish government bonds maturing in more than one year returned 3.9 percent in 2012, including re-invested interest, according to Bloomberg/EFFAS indexes. That was the worst performance since 2009.
Danish government bond yields sank to record lows in 2012 as investors fleeing the European debt crisis bought AAA rated Scandinavian assets. Yields have surged this month as Denmark’s haven allure fades amid optimism Europe’s leaders have succeeded in stemming the crisis.
The Hilleroed, Denmark-based fund, which all Danes are required to contribute to by law, uses Danish government bonds to provide risk diversification, Gade Jepsen said.
“They provide safety when all risky assets perform poorly,” he said. “Through the financial crisis, since 2009, it has been very profitable to stick to that.”
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