Historic restructuring of investment profiles crosses the finish line

PFA has just completed a historic restructuring of pension portfolios worth more than DKK 40 billion, transferring funds from its old investment profiles to its new ones, which have a higher proportion of equities. The restructuring, which spanned eight months from April to December, was carried out to enhance PFA’s long-term returns and strengthen customers’ financial security. The process was supported by strong tailwinds in the equity markets along the way

PFA has now finalised the transition of savings worth more than DKK 40 billion from its four original investment profiles (Profile A, B, C, D) to the three new profiles (Profile Low, Medium, and High). Approximately 700,000 customers have been impacted by the restructuring, which is the most extensive since PFA launched its market rate product, PFA Plus. This is confirmed by PFA’s Chief Investment Officer, Kasper A. Lorenzen.

“We are very pleased to have successfully completed the largest change to our market rate product since it was launched seventeen years ago. The new profiles, which generally have a higher proportion of equities, are designed to strengthen customers’ long-term returns, and it is fantastic to see that we have successfully completed the restructuring – both technically and in terms of returns,” says Kasper A. Lorenzen.

Profile restructuring in the shadow of Trump’s trade war
The ambition to boost returns and increase customers’ financial security is primarily to be achieved by increasing the proportion of equities in savings, as equities have historically proven to be a strong source of value over time. However, a higher proportion of equities also means greater fluctuations along the way – something that became evident in the spring when Trump launched a trade war almost simultaneously with PFA’s introduction of the new profiles.

“The timing could hardly have been more challenging. We began the restructuring just as Trump’s trade war put pressure on the equity markets. It was a nerve-wracking time because, although pensions are about long-term investments, you always want to start off on the right foot. However, Trump quickly scaled back the most severe threats, the markets rebounded, and the dip in equity prices allowed us to buy at lower prices. All in all, market developments have been favourable for PFA’s customers, who have benefited from the strong equity comeback since April,” says Kasper A. Lorenzen.

Customers’ three-year returns exceed 40 per cent
With the restructuring successfully completed, the Chief Investment Officer reflects with satisfaction on the first eleven months of the year, during which PFA has also effectively managed currency and equity risks.

“We have been adept at adjusting our equity risk to the significant fluctuations in the equity markets since the start of the year. At the same time, we have managed currency risk well, protecting customers against the weakening of the dollar. This is crucial when, as a European investor, you need to have your returns paid out in DKK or euros. Finally, we have maintained our investments in major US technology companies, which have once again made a significant contribution to returns,” he says.

Currently, a PFA customer with medium risk and 15 years until retirement can enjoy a return of approximately 10 per cent for the year – and over the past three years, returns have reached 40 per cent, placing PFA at the top of the industry.