Annual Report 2023 (eng) - Flipbook - Side 10
INDUSTRIENS PENSIONSFORSIKRING A/S ÅRSRAPPORT 2023
Investment activities
Financial security
foundation
on
a
responsible
Industriens Pension was established to provide
financial security for its members. We do this
through long-term investment to achieve the
highest possible returns on investment, taking
into account traditional financial risks as well as
sustainability factors such as climate risk.
The risks are reduced by spreading investments
across geography and by taking account of any
loss of value that may occur through failure to
observe sustainability risks. Work by Industriens
Pension to assess and account for different
types of risk is described in the Risk and
solvency section on page 16.
We also want to support sustainable
development through investments and minimise
adverse impacts on society from investments, as
described in the Returns on a responsible
foundation section on page 13.
Return for the year
The result on investment activities was DKK 12.4
bn. after costs and before tax in 2023. This
corresponds to a total investment return for the
year of 5.7%.
2023 was a significantly better year for
investments than most expected at the
beginning of the year, and as things looked for
much of the year.
From the start of the year, there was widespread
fear of recession in the larger economies due to
increases in interest rates in the wake of supply
chain and conflict-related price increases on
everything from food to energy. The high, and
up to October slightly increasing interest rates
made conditions difficult on share and bond
markets.
INVESTMENT ACTIVITIES
were also portfolio reorganisations in which
investors sold out of shares in China and bonds
in Japan and reinvested in the US and the EU.
Share sales in China were in part due to fears
regarding interference in conditions for
businesses by the totalitarian state as well as the
possibility of a Taiwan crisis. Sales of Japanese
bonds were because the Japanese central bank
kept the interest at rate less than 1% through
acquisitions, and this encouraged domestic
investors to seek other markets.
On the listed share market, in which Industriens
Pension has invested DKK 74.3 bn., returns on
Danish shares were 10.2%, while foreign shares
saw returns of 16.6%.
Table 7
The situation changed significantly in the fourth
quarter for several reasons. Firstly, growth in the
US in particular continued, despite the high
interest rates, primarily because there was still a
private savings surplus after COVID-19 aid.
Secondly, inflation slowly abated, not least
because energy prices normalised, and thirdly,
the American Federal Reserve reversed its
monetary policy by indicating that its interest
rates could be reduced in 2024.
The combination of the two first factors and the
statement from the Fed were the catalyst for an
unusually strong interest-rate drop of more than
one percentage point and stock markets
received a boost after being held back by high
interest rates. The correlation that had brought
down returns on shares and bonds in 2022
turned in the opposite direction in 2023. There
Investment-grade bonds (DKK 7.1 bn.) were
positively affected by the interest-rate drop in
the fourth quarter, and ended with a return of
6.5% . High-yield corporate bonds (DKK 8.5 bn.)
yielded a return of 10.9%, while yields on
emerging-market bonds (DKK 17.6 bn.) were
10.5%, as both markets, in addition to the
general drop in interest rates, benefitted from
lower credit spread.
Gilt-edged bonds (DKK 28.2 bn.), including
mortgage-credit bonds in particular, yielded a
return of 6.7% as a consequence of expected
more lenient monetary policy.
Strategic hedging of the interest-rate and
inflation risk had a negative impact on returns for
the year due to expectations of lower inflation
and interest rates in Europe. Hedging
contributed -0.5 percentage points on total
returns for the year.
Return on assets 2023
Return (%)
Benchm rk
Gi t-edged bonds
.
.
Other credit
.
.
Corpor te bonds, high ie d
.
.
Bonds, emerging m rkets
.
.
Bonds, investment gr de
.
.
Sh res, D nish
.
.
Sh res, foreign
.
.
Un isted sh res
- .
- .
Properties
Infr structure
-
.
-
.
.
.
- .
- .
Tot
.
.
Tot , inc uding hedging of i bi ities
.
.
Other str tegies
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