In the first half of 2023, LD Pensions achieved a total return of 4.8%. It was the equity portfolio in particular that generated strong returns for both The Cost-of-Living Allowance Fund and The Holiday Allowance Fund.
The return on the largest investment fund within the Cost-of-Living Allowance Fund, LD Discretionary, was 4.2% in the first half of 2023, whilst it was 5.5% for the employees' holiday allowance fund. The higher return on the holiday allowance funds reflects the fact that the proportion of shares is higher than for the cost-of-living allowance funds, due to the longer investment horizon.
2022 was a tough year for investors everywhere. It is therefore gratifying to see that members’ savings have grown again, meaning that a significant portion of last year’s losses has been recouped. Members have particular cause for celebration given the global equity markets, which have delivered healthy returns.
A greater focus on credit investments proved its worth
It was not only the equity portfolio that contributed to the strong results in the first half of the year. Strategic measures on the credit side, which were implemented in 2022, also proved to be successful.
In LD Pensions, the weighting of credit investments in the holiday allowance funds’ portfolio increased from 13 per cent at the start of 2022 to 27 per cent by the end of the year. In addition, the credit portfolio became more diversified, partly through the purchase of high-yield bonds.
The strategy delivered the desired return in the first half of 2023, as the return on credit investments proved to be significantly higher than the return on the safest bonds. This made a positive contribution to the return on investment for the holiday allowance funds.
Subdued expectations for returns in the second half of 2023
LD Pensions’ expectations for returns in the second half of 2023 are subdued. The US Federal Reserve is expected to keep key interest rates at a high level. In Europe, it is clear that growth is slowing, and in China the authorities are grappling with a property sector in crisis.
“Our assessment is that the financial markets are walking a tightrope. In the US, the central bank continues to pursue a tight monetary policy, the full impact of which we do not yet believe has been felt in the bond and equity markets. At the same time, we are seeing clear signs of a slowdown in growth in Europe. We have therefore begun adjusting our portfolios in light of the headwinds expected in the financial markets in the second half of 2023,” says Lars Mayland Nielsen.
Key facts
- LD Pensions’ total assets at the end of the first half of 2023 stood at DKK 46.1 billion, comprising DKK 25.5 billion held by The Cost-of-Living Allowance Fund and DKK 20.6 billion held by The Holiday Allowance Fund.
- In the Cost-of-Living Allowance funds, virtually the entire membership is eligible for payouts. Payouts to members and levies to the state totalling DKK 1.4 billion were therefore slightly higher than the investment return of DKK 1.1 billion.
- In the holiday allowance funds, assets increased by DKK 0.6 billion. This was because the return on investment of DKK 1.0 billion more than offset payouts and changes in reported holiday allowance funds of DKK 0.4 billion.
