Danish pension company Velliv has warned that a significant fall in returns could be in store in 2025, despite delivering near-record returns in 2024.

The group's latest update showed that 2024 could end up among the best years in the past 10 years, with returns between 12.7 and 15.4 per cent for a typical customer with 15 years to retirement and medium risk in 2024 so far.

This puts it close to the record year of 2019, when returns were in the range of 17-19 per cent.

Whilst the firm clarified that it is unlikely to reach that high this year, it said that positive sentiment in the financial markets and an additional interest rate cut from the ECB later in December mean is not impossible that the return will grow a little further during the month.

According to the group's latest update, the 2024 returns were largely driven by a few companies, as well as the development of US stocks, which had a return of 27 per cent.

This stood in "stark contrast" to stocks closer to home for the company, as Danish stocks delivered a return of 2 per cent this year, after an autumn of falling share prices.

However, Velliv said that the company is starting to see the effects of its new investment strategy, which in recent months has secured us a return at the top of the market.

The group suggested that there will also be further positive developments in 2025, although it acknowledged that returns are likely to take a dip compared to this year.

"Should 2025 end with a return of approximately half of this year, we would not be surprised based on the knowledge we have today about what the future holds," the company stated.

Indeed, Velliv warned that 2025 will be a year of change, with, among other things, Donald Trump as the new US president and "a world that looks more divided than in many decades".

It also highlighted the recent growth in US, and increasing headwinds in Europe, as illustration of this, warning that, with increased protectionism in the US, this is expected to have an impact on interest rate developments.

"Against this background, we expect interest rates to fall faster in Europe than in the US," the company stated. "Conversely, we expect the US stock market to also be a leader next year compared to the rest of the world."

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