A new pension lifecycle product, AlfaPension, launched by Denmark’s AkademikerPension has generated a stronger return in 2024 than the pension fund’s traditional products.

AlfaPension was launched at the end of 2023 following “dismal” returns in 2022, which saw an -11.6 per cent return. Alfa works as a typical target date retirement fund continuously adjusting and reducing investment risk profiles as members get older.

During its first full year, the product made an annual return of 11.2 per cent – for younger members with medium risk – which is the default used by AkademikerPension. However, those of a different age and different risk profile will have received a different return.

"2024 was the first full year for our new product, AlfaPension. The return is definitely approved and we have learnt a lot that we will build on in the time to come. There were positive returns on all risk and age profiles, and the result was generally better than on our 'old' products," AkademikerPension investment director, Anders Schelde, said.

However, for members invested in AkademikerPension’s market rate product, with a flat profile and average rate, the annual return was 8.3 per cent.

"It's not that we're doing less on these old products, but they simply have a different strategic risk level, and it's the risk level that lifts the return – not just this year, but also in the long term,” Schelde said.

"Global equities, and US tech stocks in particular, have done the heavy lifting with double-digit percentage returns. But bonds and unlisted investments have also generated positive returns in 2024. On the other hand, after many good years, there was a disappointing return in the Danish stock market."

Compared to other pension products with comparable risk, AkademikerPension lands in the middle of the market in terms of return in 2024. Schelde said pension funds’ approach to listed vs non-listed investments, and equity strategies themselves, has set the market apart in 2024

" You can always do things better, but we are now also satisfied with being solidly placed in the middle of the market. The companies that have done better in 2024 seem to be pursuing a strategy with greater short-term fluctuations," Schelde said.

In addition, Schedle said there are more adjustments on the way such as modifications to two of the three risk profiles in AlfaPension. The pension fund plans to lower the risk in the ‘low risk’ option and increase the risk in the ‘high risk’ but the medium risk will remain the same.

Schelde also revealed that in the pursuit of even higher returns for its members, a major adjustment of the equity strategy is being worked on.

"We are in the middle of the process and will of course tell you much more about it when the final strategy is ready. Equities are the largest and at the same time the riskiest asset class in AlfaPension, so we are very focused on having a robust and updated investment strategy,” he concluded.

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