Danish pension fund bets on recovery for 2021 gains
The investment department of the Danica Pension believes that 2021 will deliver positive returns to pension customers. Despite the current restrictions and shutdowns, the Danish pension funds expects an economic recovery will pick up speed during 2021, strongly supported by corona vaccines, which are being rolled out around the world right now, said Poul Kobberup, CIO of Danica Pension. He expects a significant boost in corporate earnings this year.
With recent share price increases, however, investors have already taken advantage of some of the joy of the coming vaccines, but Kobberup expects further increases in 2021. “In addition, the economy and financial markets continue to be supported by an extremely lenient monetary policy from central banks. However, it is important for us to point out that we are in a very uncertain time, and the coronavirus still has the potential to create a really sour mood in the financial markets, if restrictions and shutdowns are tightened or dragged out, or the economic recovery shows signs on getting stuck. In other words, we are not out of the period with an increased risk of relapse,” warned the CIO.
After huge falls up to 20% in March 2020, due to the Covid-19 induced market volatility, the Danish pension fund ended the year with returns up to 12.2% (for savers with a high-risk profile and 30 years to retirement). These were boosted by Danish and tech stocks, identified as 2020 best performing assets by Kobberup.
Danica Pension’s strategy, implemented in 2016 with a focus on internal asset management, including building alternative investments in a new 3-fund set-up, has resulted in strong returns over the past five years. Including 2019, savings grew by 25-30%, stated the pension fund. Customers with high-risk risk profiles and 30 years to retirement have achieved approximately 50% in returns over the 5-year period, while those customers with low risk and five years to retirement have achieved returns of approximately 25% in the last five years.