It has been a turbulent start to 2025, culminating in April when the US announced tariff increases on virtually all its trading partners. The threat of a global trade war with high tariff barriers sent the financial markets into uncertain territory. Uncertainty about economic and financial developments rose to levels not seen since the financial crisis and the Covid-19 crisis.
Falling share prices and widespread uncertainty affected most people – including LD Pensions’ members, who were understandably concerned about their accrued cost-of-living allowance funds or holiday allowance funds.
Emil Willemoes Helms, portfolio manager in LD Pensions, followed developments closely in April.
The stock markets, in particular, reacted with sharp falls in share prices, and this was, of course, also reflected in LD Pensions’ return. Fortunately, we can now confirm that we have taken sound strategic and tactical decisions which have steered us safely through the turmoil. Our members’ savings have been well protected.
Prudent decisions protected the savings
In response to the market turmoil, LD Pensions decided to increase the frequency of so-called rebalancing – that is, the ongoing adjustments that ensure investment portfolios continue to reflect the desired weighting between equities, safe bonds and credit investments in accordance with the strategic benchmarks. Among other things, this meant that global equities were ‘bought up’ following the initial sharp falls in share prices. Furthermore, a larger cash position has helped to cushion the impact of the sharp price fluctuations, whilst LD Pensions’ currency hedging strategy against the US dollar has also made a positive contribution to return performance.
These turned out to be sensible decisions. Some of the losses from the first week of April were offset by positive returns later in April.
LD Pensions’ members thus fared reasonably well during the first four months of the year:
- Members of the employees' holiday allowance fund achieved a return of -1.9% in the first four months of the year, after pension return tax and costs. By comparison, pension companies have, on average, achieved a return of -3.1% for members with 15 years until retirement and a moderate risk profile.
- Members with their savings invested in LD Discretionary, the primary investment fund within the Cost-of-Living Allowance Fund, received a return of -0.2% in the first four months of the year. By comparison, pension companies have, on average, achieved a return of -1.8% for members with 5 years to retirement and a moderate risk profile.
The figures from the pension companies have been compiled by the research firm Nikolaj Holdt Mikkelsen.
“For members with a shorter investment horizon – which applies to many of our members who have accrued cost-of-living allowance funds – market fluctuations can have a particularly significant impact. It is therefore particularly satisfying that, in this very specific situation, we have been well equipped to deal with the turmoil that has affected all investors,” says Emil Willemoes Helms.
The economic situation remains fragile. Current economic growth is reasonable, but the outlook is uncertain. Trade agreements are still lacking, and the uncertainty surrounding possible changes to tariff rates in the run-up to July continues to pose a significant risk. LD Pensions is therefore monitoring developments in the financial markets closely and is continuously assessing whether there is a need to adjust its investment portfolios.
