PFA: Returns further improved in Q3 2020
After the Q3 2020, PFA has generated a total return of DKK 11.6 billion. Thus, the positive development over the summer continued following the turbulent start to the year where COVID-19 really shook the financial markets. At the same time, customers have welcomed PFA Climate Plus which was launched in early summer and has already reached payments amounting to DKK 1 billion.
So far, 2020 has been a major rollercoaster ride for Danish pension savers and customers in the Denmark’s largest pension company, PFA. The pronounced downturn at the beginning of the year was followed by an almost just as pronounced upturn. Accordingly, the total return in PFA after Q3 2020 reached DKK 11.6 billion for the year.
In Q3 alone, the total return increased by DKK 13.4 billion, which shows that the promising results from Q2 continued over the summer months. September was more of a jog on the spot in terms of return.
“The returns further improved in Q3 and are around 0 per cent for market rate customers, while we have generated a return of 5.2 per cent in our average interest rate environment. So, in comparison with March and April where the situation was at its worst in the financial markets, we have made a good comeback, and at the end of Q3, we are excited to see a total return of DKK 11.6 billion. The positive trend in the financial markets, where the losses have basically already been recovered, was very difficult to picture looking back six months,” says Kasper A. Lorenzen, Group Chief Investment Officer at PFA.
The main reason for the rising optimism during the quarter is that, in the short term, COVID-19 has proven gentler with the economy than initially feared. This is not least due to the fact that the central banks and politicians around the world have been quick to react and initiate a range of programmes and bailout packages that have supported the financial markets and stimulated the economy again.
So far for the year, the bond portfolio (1.3 per cent) and PFA’s large property portfolio (0.1 per cent) have pulled the return up while the alternative investments (-0.6 per cent) and the equity portfolio (-2.6 per cent) were in a slightly negative territory after the quarter.
The equity portfolio in particular, covers the significant differences in relation to sectors and countries where the large technology companies especially have pulled the market up. Therefore, the technology-heavy Nasdaq index also performed well. The same applies to the Danish C25 index which in times of crisis benefits from companies with sturdy buffers and stable earnings. On the other hand, the world index has, in general, been affected more severely and has been pulled down by the negative COVID-19 development in countries like France, Italy and Brazil.
Cautious optimism in an uncertain world
The total return related to market rate was at -0.4 per cent (incl. CustomerCapital). This means that PFA’s market rate customers have received a return of between -1.1 and 0.2 per cent (incl. CustomerCapital) in Q1 to Q3 of 2020, depending on the selected investment profile and years to retirement. The fact that the return related to the average interest rate products after Q3 was all of 5.2 per cent is largely due to PFA’s interest rate hedging.
“A return of around 0 per cent to market rate customers is not something to get ecstatic about. But again, we must remember how hard the financial markets were affected at the beginning of April after COVID-19 had almost kicked the bottom out of the market. We have had a good rebound in a short time and, at the same time, we can think back on 2019 which, in many ways, was a historically strong investment year where our market rate customers in particular padded their savings with a return of up to 19 per cent. 2019 may seem far away with everything that has happened this year, but it is nonetheless important to remember that pensions are long-term savings where there will be fluctuations from year to year,” says Kasper A. Lorenzen.
Looking forward, we expect that the launched fiscal initiatives will support the markets in the coming period. Having said that, new uncertainty can also be felt as the COVID-19 pandemic starts to flare up again for real. In the long term, it also remains unclear which actual consequences the historically large monetary and fiscal initiatives will have. Because while the large stimulus packages have been effective in the short term, they do have an expiry date, which is why there is reason for some caution. Finally, we face an epoch-making American presidential election.
“Of course, we relate to the fact that it is a very uncertain world we are living in and, therefore, there is reason for caution. Consequently, we constantly adjust our investment strategy and can react quickly in the changing markets. This is our anchor in relation to the customers’ savings, which we very much safeguard. But otherwise, our fundamental belief is in the good and broad portfolio that we have developed and which must function when the markets move up and down,” says Kasper A. Lorenzen.
PFA Climate Plus gathered momentum in Q3
PFA’s new very climate-friendly pension product PFA Climate Plus which was launched in early summer has reached the first major milestone. The pension company’s customers have now placed pension funds amounting to more than DKK 1 billion into the pension product. At the same time, the interim return which PFA Climate Plus has provided shows that the green investments have been good for savings.
“As Denmark’s largest pension company, we want to contribute to sustainable development. Therefore, for many years, we have also worked systematically with responsibility and sustainability when we invest our customers’ savings. With PFA Climate Plus, we amped up our climate ambitions and also made it easy for customers to place their savings in a climate-friendly investment solution. So, it is very gratifying to see that it is something our customers have been quick to accept. This bodes well for the future,” says Kasper A. Lorenzen.
In Q3, PFA was able to announce a three-digit million loan agreement with the Swedish company Northvolt in connection with the construction of one of Europe’s largest factories for the production of sustainable battery cells for primarily electric vehicles. In addition, PFA is also taking an active part in the possible establishment of a new wind energy island in the North Sea.
Investment return per asset group in Q1 - Q3 2020
|Asset||Q1 - Q3 2020|
|Listed shares||-2.6 %|
|Alternative investments||-0.6 %|
Returns in PFA Plus, Q1 - Q3 2020
|Years to retirement||30||15||5||-5|
Profile D - high risk
|-1.1 %||-1.1 %||-0.3 %||-0.2 %|
Profile C - moderate risk
|-0.7 %||-0.7 %||-0.2 %||0.0 %|
Profile B - low risk
|-0.3 %||-0.3 %||0.0 %||0.1 %|
Profile A - very low risk
|0.0 %||0.0 %||0.2 %||0.2 %|
The return includes 5 % in Individual CustomerCapital and a return of Individual CustomerCapital of 8 per cent per year.
Returns in PFA Invest, Q1 - Q3 2020
|PFA Invest Balance AA||-0.4 %|
|PFA Invest Balance A||-1.5 %|
|PFA Invest Balance B||-1.5 %|
|PFA Invest Balance C||-2.6 %|
|PFA Invest Balance AKK||-0.3 %|
For additional information contact
Head of External Communications and Chief Press Officer, Kristian Lund Pedersen, email@example.com, (+45) 39 17 58 79.