PFA rounds off the year with strong returns to the customers

Anders Damgaard

2017 has proved yet another very prosperous year for PFA’s customers with a market rate return reaching up to 14 per cent. This is recounted by Group CFO Anders Damgaard from PFA regarding the investment return for the year – a return that reinforces PFA’s position as the company which has generated the highest returns to its customers seen in a three-year as well as in a five-year perspective.

Consistent with previous years, 2017 turned out to be an incredibly strong return year during which the customers’ market rate savings grew significantly. Group CFO Anders Damgaard is also pleasantly surprised with the development given the political uncertainty that characterised the beginning of the year.

Optimism beats uncertainty

“The beginning of the year brought some uncertainty due to, for instance, a newly elected president of the USA, Brexit as well as a number of important European elections and referendums, which were characterised by isolationist trends, like in the US, that were in danger of dampening the optimism on the financial markets. Luckily, optimism prevailed, and instead we saw a solid economic growth and momentum on the financial markets”, the Group CFO says.

He explains that PFA has succeeded in translating the positive notes on the financial markets into a customer advantage - all through professional and successful active management.

“During the year, we decided to increase our investments in emerging markets and European equities, and we protected our investments against fluctuations in the US dollar, which has declined 12-13 per cent decline in 2017.  This was a key factor in ensuring a return which is among the best in the market and in PFA’s efforts to maintain its top ranking when it comes to the long-term return seen in a three- and five-year perspective,” says Anders Damgaard.

He adds that PFA’s alternative investments and selection of individual shares also made a positive contribution to the return for the year.

High-risk investments worthwhile again in 2017

When we consider the customers’ individual returns, 2017 repeats the pattern that we have seen in recent years where customers willing to take risks were rewarded with the highest returns.

“Customers in profile D, which is the investment profile with the highest risk in market rate, received a return of up to 14 per cent, whereas customers in the low-risk profiles A and B received approximately five per cent. These are strong returns in a period characterised by very low inflation where the bank rates are zero per cent”, Anders Damgaard adds. He also uses figures to illustrate what PFA’s handsome returns have meant to the individual customer.

“Put together over the past five years from 2013 and to the present, a typical PFA customer with a market rate plan has received an average return of 10 per cent per year. This corresponds to a compound interest increase on the savings of 61 per cent. In other words, the customer has received an amount of DKK 61,000 exclusively during the five-year period for each amount of DKK 100,000  [before tax] which is saved for retirement”, the CFO says.

A timid gaze in the crystal ball

Booming parties do not go on forever – nor do booming equity prices. However, foreseeing when the rise is going to stop is not easy. Right now, the crystal ball continues to predict favourable trends.

“The global economic growth is still robust, though with an element of risk, for instance in the form of quick monetary tightening, increased unrest in international trade and a high level of debt in China. Generally, we are still optimistic when looking into 2018, although we will probably experience more and larger bumps on the roads of the financial markets than we have this year”, he says.

He adds that in spite of the optimism, PFA will continue expanding its share of the alternative investments and will seek to consolidate for a future in which the return on equities and bonds may be lower.
“It is important to have some alternative sources of return which can contribute towards generating positive returns in years with unfavourable conditions on the equity and bond markets. To make use of our strong foothold on the market, we have therefore made a number of historically large alternative investments in, for instance, wind energy, infrastructure and properties. These are investments that take a long time to build, and they are going to prepare us for the future so that we can continue being the company that generates the best long-term returns to the customers”, the Group CFO concludes.