The Danish pension fund for academics, P+, delivered strong returns so far this year, with its Life Cycle medium-risk and Sustainable medium-risk funds already reaching levels P+ would normally be satisfied with for a full year.

The fund’s interim results showed that, by the end of July, members with savings in the P+ Life Cycle fund achieved a return of 9.5 per cent, while members in the P+ Sustainable fund achieved a return of 9.3 per cent.

Additionally, the results reported that members with an average interest rate and the P+ Balance investment profile saw a return of 6.8 per cent at the end of July.

These returns mean that, over the past three years, both P+ Life Cycle and P+ Sustainable have ranked in the top five in Nikolaj Holdt Mikkelsen’s independent industry comparison of market-rate products for members with 15 years to retirement and a medium risk profile.

Commenting on the figures, P+ chief investment officer, Jasper Riis, said: “The return after the first seven months of the year is very impressive and is at a level we would normally be satisfied with for a full calendar year.

"At the same time, a return of just over 9 per cent is significantly above our long-term expectations for annual returns, which for the medium-risk profile are closer to 7 per cent.”

The fund said that financial markets have delivered strong year-to-date returns despite ongoing geopolitical turmoil, with performance mainly driven by listed shares.

However, P+ explained that, in contrast to recent years when performance was driven primarily by the largest tech shares in the ‘Magnificent 7’, this year there was a trend towards far more companies contributing to the positive return.

“This year, the largest tech stocks have performed more divergently than in the past and have not necessarily delivered massive returns across the board,” Riis added.

“On the other hand, we can see that the many global suppliers to tech companies have started to deliver strong returns, which suggests that the significant returns from the largest tech companies and their artificial intelligence (AI) initiatives are now being supported by a broader range of companies.

“This trend underlines that the tech industry and AI are becoming increasingly important, particularly for the US economy. At the same time, as investors, we are seeing greater diversification as more companies contribute to returns, so from an investment perspective, this is a positive development.”

The interim results also highlighted a brief dip in returns in the spring due to the US conflict with Iran. However, P+ noted that financial markets recovered quickly and have generally characterised market reactions to geopolitical turmoil throughout the year.

Expanding on this, Riis explained that the market has consistently demonstrated the ability to absorb the "various geopolitical surprises" of the year.

“Although there have been, for example, fierce exchanges in the conflict between Iran and the US, it is clear that, after all, there are limits to how far either side is willing to go," Riis said.

"Neither Iran nor Trump, for example, would be comfortable with a situation where we end up with a global oil shortage, and both sides are therefore inclined to take a step back before the conflict risks having unforeseeable consequences,” he continued, adding that the markets “appreciate this restraint”, and as a result, market developments are relatively balanced.

He also pointed out that the industry should probably expect more disruption in supply chains for some time to come, but emphasised that this should not be a cause for concern in the longer term.

“In recent years, we have periodically experienced more and larger market fluctuations than we may have been used to in the past, but it is important to remember that even large fluctuations are smoothed out over a longer time horizon. We are, of course, monitoring market movements closely, but as long as we see positive growth and inflation does not spiral out of control, we remain optimistic,” Riis concluded.

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