LD’s 2017 Annual Report shows a year of excellent results and a solid return on investment. The total return on investment amounted to DKK 2.9 billion. Equity investments made the largest contribution to the result, but credit and bond investments also delivered satisfactory returns. For just under 90 per cent of members who have their savings in LD Discretionary, a return of 6.9 per cent was credited. For the remaining members, the return was determined by individual portfolio selection, and for this group, high returns in the equity funds contributed to solid results for the vast majority.
Assets greater than expected
The solid returns in 2017 contributed to LD’s assets being DKK 1.6 billion higher than expected at the start of the year. LD’s assets thus stood at DKK 41.6 billion at the end of 2017. Comparing this result with the asset forecast made back in 2014, it is clear that the forecast has been revised upwards by DKK 5 billion in just three years, which is a significant development (see the figure below). In addition to the solid returns, which have increased members’ savings nicely in 2017, the fact that many members choose to leave their savings with LD, even though they are entitled to payouts, also has an impact on LD’s assets.
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FIGURE The figure shows LD’s realised assets compared with the asset forecast from the 2014 Annual Report and the 2017 Annual Report, respectively. Net assets at the end of 2017 were 5 billion above the 2014 forecast. The decline in net assets in 2015 was due to extraordinary payments of 10 billion kr. in tax to the state, resulting from new rules on tax credits within LD.
Members will remain in LD
LD’s ability to generate relatively stable returns appears to be very much in line with its members’ expectations. Payouts hit a new record low in 2017, when just DKK 2.3 billion was paid out to just over 30,000 members. In addition, LD transferred just under DKK 1.4 billion to the state in the form of advance tax payments. These advance tax payments therefore account for a relatively large proportion of the total compared with the payouts. Members receive a tax credit because LD pays the tax in advance, and can later have their savings paid out tax-free.
On average, members defer payouts by four years after reaching the age of 60, when payouts become possible, and many continue to save until they reach state pension age. When LD attempts to pay out the LD Savings at the age of 70, most members choose to continue saving rather than have the funds paid out. In 2017, members aged 70 and over accounted for 12 per cent of the total assets.
High return with below-average risk
Compared with pension companies, LD’s investment horizon is short. This limits LD’s scope for investing in shares and other risky assets. The returns achieved must be assessed in the light of the specific conditions applicable to LD. Morningstar takes the risk profile into account when assessing LD’s returns on investments in listed securities in LD Discretionary. Listed investments account for 97 per cent of LD Discretionary and are included by Morningstar in a comparison with almost 1,300 European funds over a three-year period. Morningstar characterises the return as high and the risk as below average, and it is particularly satisfying that this places the fund amongst the top 10 per cent of best-performing funds in Morningstar’s rating®.
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* The listed investments are held in LD Equities & Bonds, which accounts for 97 per cent of LD Discretionary. The ratings for LD Equities & Bonds and for LD’s equity and bond portfolios as at 31 December 2017 can be found on page 24 of the annual report. The ratings are updated once a month on morningstar.dk and on ld.dk.
