$150 Billion Danish Pension Fund Decides to Increase Risk

Danish pension fund ATP is opening the new year by explaining that it will be restructuring its allocations to increase overall risk for its members.

Traditionally, the $150 billion ATP has structured its investments so that 80% are lower risk, while 20% are higher risk, according to the fund’s press release this Monday. However, the new breakdown will instead be tiered so that younger members with more than 15 years left until retirement will take on greater risk than the traditional 80/20 split. Those members will have 60% of their deposits invested at low risk.

Once the member is within 15 years of retirement, the risk of their portfolio will gradually decrease.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

ATP had been lobbying the Danish government for years for permission to increase risk-taking in investments after falling interest rates on bonds hurt its portfolio. In fiscal year 2020, the fund had over half of its portfolio invested in bonds. In the first quarter of 2021, it lost nearly $200 million due to poor bond performance.

Denmark’s parliament recently passed a law which finally enabled ATP to be less reliant on bonds and be more flexible when it comes to risk-taking.

In the past five years, ATP has had averaged an annual return of approximately 20%. The fund’s leadership hopes that with this new legislation, the returns will increase even more.