LD Pensions has 1.1 million members with total assets of DKK 45 billion across two funds – The Cost-of-Living Allowance Fund and The Holiday Allowance Fund. The return as at 30 September 2022 was -11.4% in LD Discretionary, which accounts for over 90% of the accrued cost-of-living allowance funds. The return on the accrued holiday allowance funds was -10.2%. Both funds performed significantly better than the general trend among balanced-risk investment funds, which on average recorded a return of -16.0% in the first nine months of the year.
For members with accrued cost-of-living allowance funds, it has been beneficial that the inflation risk has been partially hedged and that the equity risk has been reduced since the summer.
We are pleased that we have, to some extent, been able to mitigate losses for our members during an exceptional year characterised by sharp fluctuations in the financial markets. It is difficult to predict when the markets will turn round, but we believe that our investment strategy will generate a good return for our members in the long term.
It has been an advantage for members with accrued holiday allowance funds that these funds have been invested only to a limited extent in Danish bonds, as mortgage bonds in particular suffered unusually heavy losses in 2022. The low exposure to the Danish bond market is due to the fact that approximately one-third of the holiday allowance funds are held as liquidity by Danish employers. In 2022, the loan to employers made a positive contribution. Employers pay in holiday allowance funds when they no longer require the liquidity, which necessitates ongoing adjustments to the investment portfolio.
“The typical investment horizon for holiday allowance funds is around 15 years. This allows for a risk profile with an attractive potential return,” says Lars Mayland Nielsen.
October has seen slightly more positive market conditions, and the current return on the LD Discretionary fund stands at -9.3%, whilst the return on the accrued holiday allowance funds is -7.8%.
Returns as at 30 September 2022
|
|
Year-to-date |
1 year |
|
Balanced investment funds – simple average 1) |
-15.9% |
-11.8% |
|
Balanced investment funds – asset-weighted average 2) |
-16.0% |
-12.2% |
|
Employees’ Cost-of-Living Fund – LD Discretionary 3) |
-11.4% |
-8.8 |
|
The Holiday Allowance Fund – Net return 4) |
-10.2% |
-8.1% |
1) Average for 32 balanced investment funds that are freely available to private investors. See the statistics on investment funds at Finans Danmark
2) Asset-weighted average for the balanced investment funds included under 1).
3) LD Discretionary accounts for more than 90 per cent of members’ assets in the Cost-of-Living Allowance Fund and is therefore the main product for members of the Cost-of-Living Allowance Fund.
4) The Holiday Allowance funds are credited with a net return after pension return tax and costs.
