Danish Pension, Insurance Assets Grow to $712 Billion

Denmark’s pension and insurance industry has grown to nearly 4.8 trillion kroner ($712 billion) as of the end of the third quarter, which is more than twice its GDP, according to Danmarks Nationalbank, the country’s central bank. The pension industry accounted for the lion’s share – approximately 4.6 trillion kroner – of the total amount.

“The first nine months of 2019 saw considerable growth in the companies’ balance sheets,” said the bank, which reported that the industry saw gains of approximately 702 billion kroner for the first three quarters of the year due to “substantial returns on pension wealth.” That included investment returns of 479 billion kroner.

The bulk of the 479 billion kroner came from equities, bonds, and interest rate derivatives, which returned 165 billion kroner, 150 billion kroner, and 116 billion kroner respectively. Only 46% of pension and insurance firms’ investments are in Denmark, with the majority outside of the country “so that investments are diversified, and the risk is spread on countries with different economic and political risks.”

The bank also reported that the asset value of its pensions and insurance sectors account for 213% of its GDP. According to the Organization for Economic Cooperation and Development (OECD), the number of its member countries with pension assets exceeding GDP increased to eight in 2018 from five in 2008. The average ratio of assets to GDP was 126% in 2018, compared to 49.7% in 2008.

For more stories like this, sign up for the CIO Alert newsletter. 

Denmark topped the OECD’s ranking in 2018 with assets worth 198.6% of GDP at the time, followed by the Netherlands (173.3%) and Iceland (161%).

Denmark’s pension funds have accumulated returns of 256 billion kroner since the beginning of 2018, while its life insurance companies returned 222 billion kroner. The bank said the large returns reflect gains on interest rate derivatives and bonds due to falling interest rates during the first nine months of 2019.

Outside of Denmark, the US attracts the most investment from the country’s pension and insurance sector, drawing 742 billion kroner. Germany and the UK accounted for 334 billion kroner and 189 billion kroner worth of investments, respectively, followed by Luxembourg and Ireland, which drew 129 billion kroner and 122 billion kroner respectively.

The bank also said that half of the pension and insurance sectors’ shares and equity investments are unlisted, and that most of their alternative investments are in this category. The unlisted investments include property investments, investments in private equity, infrastructure, and hedge funds.

Related Stories:

Denmark Pension’s 2018 Ended Badly

Netherlands, Denmark Top Global Pension Ranking

Denmark’s ATP Rebounds Big

Tags: Danmarks Nationalbank, Denmark, insurance, OECD, Organisation for Economic Co-operation and Development (OCED), Pension

Seth Kelly, the chief investment officer of the $11.6 billion Missouri State Employees’ Retirement System (MOSERS), resigned from his position on December 3, a spokesperson confirmed with CIO.

Shannon Davidson, deputy chief investment officer, will serve as interim CIO, and the system will launch its search for a new CIO in January, the spokesperson added. The retirement system did not divulge the reason behind Kelly’s departure.

Kelly was deputy CIO prior to the departure of Rick Dahl, who resigned in 2016 after serving for 21 years as CIO at the pension. Under Kelly’s stewardship, the portfolio underwent a significant modernization “to address the challenging return environment,” Kelly wrote in the latest annual report. He shepherded the strategic asset allocation to one inclusive of more growth-oriented investments, as well as real assets (both public and private), hedge funds, and private credit.

Kelly also put a strong emphasis on cutting overall fees, and reduced the fees the portfolio pays by $54 million in fiscal year 2019. Over the past three years, Kelly helped MOSERS reduce its annual management fee costs by $24 million, primarily from the decrease of partnerships with “high fee” situations like hedge funds and private equity partnerships.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Missouri State Treasurer Eric Schmitt issued a warning in 2017 that the state was in an “alarming” scenario given the downward spiraling funding ratio, and strongly suggested the fund significantly reduce its “expensive investment fees,” which Kelly has done.

The MOSERS portfolio generated a 1.8% outperformance in fiscal year 2019, returning 4.3% compared to the 2.5% benchmark.

“I appreciate the opportunity to serve as the chief investment officer at MOSERS. I am a lifelong resident of central Missouri and have personal relationships with many MOSERS beneficiaries,” Kelly said in the retirement system’s latest annual report. “Those relationships allow me to witness the great things that pension plans, like MOSERS, provide to Missouri state employees in retirement. Those relationships also motivate my everyday behavior to produce results that make the future benefits of the retirees secure.”