Europe Shows Little Promise for Denmark’s Biggest Pension Fund
“We all hope for a better Europe, but there is little reason for optimism at this point,”Carsten Stendevad, chief executive officer at ATP, which manages $140 billion in assets, said in an interview yesterday. Stendevad, 40, started at ATP this month after leaving a position as global head of financial strategy at Citigroup Inc. in New York.
ATP has limited its government bond portfolio to Danish and German debt since 2011, when it renegotiated contracts to avoid taking French bonds as collateral. ATP said in December the fund is broadening its investment scope to benefit more from global growth as the euro area stays mired in a recession. The strategy emulates an approach adopted by Norway’s $725 billion sovereign wealth fund, which is relying less on European assets to generate returns.
“We, like all other investors, are facing challenging market conditions to generate attractive and predictable returns,” Stendevad said. “It is a difficult market. I remain concerned about the world economy. It’s in a fragile condition.”
The economy of the 17-nation euro area will shrink 0.3 percent this year, after contracting 0.6 percent in 2012, the International Monetary Fund said April 16. So-called advanced economies will expand 1.2 percent while a group of nations the IMF defines as developing countries will see their output grow 5.3 percent in 2013, it estimates.
ATP plans to start buying listed equities outside Denmark, it said in December. The fund’s portfolio of listed shares now holds only Danish stocks traded on the Nasdaq OMX Group Inc. exchange in Copenhagen. Denmark’s benchmark stocks gained 5.5 percent this year, compared with a 1.5 percent increase in the STOXX Europe 600 Index. The MSCI World Index (MXWO) is up 5.7 percent in the period.
ATP, which is based north of Copenhagen in Hilleroed, last year had a return of 57.4 billion kroner, or 9.9 percent, on its hedging and investment activities, as credit bonds, Danish stocks and private equity holdings gained. The fund reported a profit of 10 billion kroner after paying out 11.9 billion in pensions and allocating 34.8 billion to future payments.
The fund increased its equity allocation and reduced its bond allocation last year after the hunt for havens from Europe’s debt crisis sent yields plunging, according to its annual report. The reallocation didn’t significantly increase ATP’s overall investment risk of major losses, since that already was low, it said.
ATP in December shut down its hedge fund unit, fired half the 35 people working there and unveiled plans to weave hedging strategies across all its divisions to help take advantage of investment opportunities.
“There are rays of hope, certainly within the U.S. economy,” Stendevad said. “But rays of hope are not the same thing as sunshine.”
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