COPENHAGEN, Oct 26 (Reuters) - Denmark’s largest pension fund expects lower returns in future as central banks tighten liquidity, its chief executive said on Thursday after the fund achieved its highest return in five years in the third quarter.
ATP achieved an investment return of 9.93 billion Danish crowns ($1.58 billion) in the third quarter, equivalent to a rate of return of 8.9 percent relative to its investment portfolio, the highest level since 2012.
The return was achieved across all asset types, especially equities. Listed Danish equities generated a return of 5.3 billion crowns.
“It’s an experiment we’re seeing now: how do we get back from the very geared balance sheets in the central banks to a more normal level. We don’t know how the markets will react to that,” chief executive Christian Hyldahl said.
He talked to Reuters before the European Central Bank, as widely expected, announced that it would cut its monthly asset purchases to 30 billion euros ($35.25 billion) from 60 billion euros starting January.
When the liquidity in the market is being reduced the rises in the stock markets cannot continue, Hyldahl said.
“That does not mean everything will fall 20 percent, but the returns we’ve seen earlier will not continue”.
ATP, which handles mandatory pension savings for more than 5 million Danes, holds assets worth 758 billion crowns, ranking it among Europe’s top-four pension funds, according to British advisory firm Willis Towers Watson. ($1 = 6.3005 Danish crowns) ($1 = 0.8510 euros) (Reporting by Teis Jensen, editing by Alister Doyle)