Annual report 2004
LD recorded very satisfactory results in 2004 and a gross return of 13.7% on the portfolio LD Discretionary Investments, which included 92 % of total assets at the end of 2004. The performance of LD's investment pools was also satisfactory. LD Discretionary Investments posted an excellent return on equities of 22.4 %, which was attributed to the relatively high proportion of Danish equities held and stock-picking from among Danish and foreign equities. Considering that the interest rate riskwasmaintained at a low level throughout the year, the bond return of 6.7 % in LD Discretionary Investments was also satisfactory.
New business terms
On 24 March 2004, the Danish parliament adopted an act on LD, which markedly changed LD's business terms. The act aims to create a balance between consideration for investors' freedom of choice and consideration for LD's role as an active and competent investor. It is positive for LD that its investment competencies may be maintained to the benefit of members wanting LD to manage their assets, although the new act implies a faster decline in member and asset levels than predicted. The new act allows members to transfer their assets from LD to another pension scheme as of 1 July 2005. It is very difficult to anticipate the scope of asset transferral, and it will also be difficult in the long term to forecast major fluctuations in the number of assets transferred. In anticipation of the coming into force of these transfer provisions, the asset structure of LD has been adjusted to improve cash resources.
Change in asset allocation of LD Discretionary Investments
In future, members will need to realise investments in LD Discretionary Investments to a larger extent and at shorter notice than previously, and these requirements must not have any significant price effect. Therefore, the proportion of equities was reduced and a decision made to enhance the transferability of the least liquid equities by forming investment partnerships with other investors in 2005. Conversely, bond holdings were increased, chiefly by stepping up government bond investments; a low interest rate risk was maintained through a relatively short duration. In 2004, LD succeeded in restructuring its portfolio so that it met the requirements for a more liquid portfolio. This was also expedient in risk/reward terms. Thus, significant profit-taking was achieved thanks to higher equity prices, and the proportion of equities was trimmed. Likewise, foreign high-yield bonds, emerging market bonds and corporate bonds contributed very satisfactory gross returns. Investments in these bond types were simultaneously reduced in the course of the year.
Due to liquidity considerations, the interest rate risk pertaining to the bond portfolio was kept at a very low level throughout the year. LD therefore had only limited scope for achieving price gains on long-term bonds in connection with the decline in interest rates.
New subsidiary under formation
The new act on LD authorises LD to form an asset management company which is not a fully owned subsidiary.In order to continue benefiting from its investment competencies, LD has decided to form such an asset management company, which shall provide LD and others with consultancy services. LD will become a majority shareholder, but the asset management company will be owned together with FiH, a Danish corporate bank, which will own 20 % of the company. Furthermore, employees will be invited to buy up to 23 % of the shares in the company.
Danish mutural funds offer investment pools
In 2004, LD entered into agreements with the five leading mutual funds in Denmark. Each mutual fund was invited to offer an investment pool with an investment mandate that the mutual fund considered relevant and attractive to LD's members. The new investment pools could be selected for the first time from 1 January 2005, but the entire group of members will not learn about the investment pools until the spring of 2005.
Download Annual report 2004 in English