Biggest Pension Fund in Denmark Takes a Hit on Its Bond Exposure

(Bloomberg) -- Denmark’s biggest pension fund, ATP, lost almost $200 million on its investment portfolio after its exposure to bond markets backfired.

“ATP’s current investment strategy is relatively heavily exposed to interest rates, and this makes it sensitive to the rising interest rates that we saw in the first quarter,” Chief Executive Officer Bo Foged said in a statement.

The fund, which oversees about $150 billion in assets, is trying to get parliamentary approval to shift into riskier corners of the market after the government said that would help boost returns. That’s after almost nine years of negative interest rates in Denmark, a world record.

Meanwhile, rising yields also drove down the net present value of liabilities by just over 50 billion kroner ($8.3 billion), ATP said.

The state-backed fund follows two investment strategies, splitting pension contributions into a hedging portfolio designed to guarantee retirement payments, and an investment portfolio intended to provide extra returns. Both lost money last quarter.

Other assets in the investment portfolio, including equity investments, generated a positive return, the fund said without providing details.

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