Danish pension company, PFA, has reported a group loss of DKK 27.3bn in the first quarter of 2022, corresponding to a return of -4.3 per cent.

Publishing its interim result, PFA said the negative return is driven by rising interest rates, but this has meant life insurance liabilities have fallen and surplus funds for average interest rate customers have been strengthened.

It said the war in Ukraine, rapidly rising inflation, a burgeoning energy crisis and rising interest rates have been a bad cocktail in the first quarter, especially for the stock and bond markets.

PFA group investment director, Kasper A. Lorenzen, said: "It has been a difficult start to the year, where it has become clear that we see a world changing. This applies both to rising prices across a broad spectrum and to financial markets, which are developing differently and more unpredictably than what we have been accustomed to in recent years.

“However, we have seen more positive tones, especially in the stock markets towards the end of the quarter, which gives rise to some optimism.”

Customers in PFA Plus have received negative returns, ranging from -1.6 to -4.0. The total return in market interest rate is -3.3 per cent.

“With our robust portfolio, we have been able to limit losses and take our precautions early on in the face of rising inflationary pressures. This means that customers in our recommended profile C in PFA Plus have received a negative return of 3.3 per cent, which is limited when we look at the large fluctuations that have been in the first quarter.

“Although it is never fun to see a negative return in a shorter period, it must be seen in connection with the fact that customers with the same risk profile last year received a return of as much as 15.3 per cent,” Lorenzen said.

In terms of its response to rising inflation, PFA said that as early as 2021 it began buying up inflation-linked index-linked bonds, which have risen in price in line with rising inflation, which has helped to pull up the return. In addition, PFA's customers have been helped by the broad portfolio of unlisted investments that have been built up over a number of years.

“At PFA, we have for many years focused on creating a broad portfolio of unlisted investments that can supplement the returns from shares and bonds and provide a good spread of risk,” Lorenzen added.

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