The typical customer of Danish pension company, Velliv, received a negative return of -15.4 per cent in 2022 up to the end of the September, it has revealed.

Velliv noted that while this return was negative, its performance was better than shares and Danish bonds.

It pointed to stock markets, which have lost 25 per cent in 2022 so far, and Danish government bonds, which have lost up to 20 per cent due to the sharp increases in interest rates.

The combination of large declines in both stocks and bonds meant that a European portfolio of 50 per cent stocks and 50 per cent bonds this year has had the worst return since 1948.

Velliv said it had succeeded in limiting the losses due to its focus on a broad risk spread in, among other things, its bond portfolio, where it invests widely in international bonds.

“We have also reduced the risk by being underweight in equities,” the pension company said.

“Velliv's investments in, for example, properties and alternative investments have also limited the losses. Finally, DinKapital has given a stable return of 4 per cent.”

Over the longer time horizon, Velliv noted that its returns were still good, with returns of around 20 per cent over a five-year term and 90 per cent over 10 years for a customer with medium risk and more than 15 years until retirement.

“In Velliv, we estimate that the uncertainty in the financial markets has not been greater since the financial crisis in 2008,” it stated.

“The markets are troubled right now, which is not least seen over the past week with large daily fluctuations on both the stock markets and interest rate markets and opposite movements from day to day.

“At the same time, we expect the current challenging market environment to continue well into 2023 before we succeed in getting inflation under control.

“The investments in Velliv will therefore continue to be composed of an underweight of shares and a strong focus on risk diversification – both across asset classes and within the asset classes, which best protects the savings.”

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