Strategy and reporting under the microscope: Denmark’s ATP awaits review

ATP, the Danish statutory pension fund, is braced for the imminent publication of an external evaluation, begun a year ago, of both its investment strategy and how it communicates its complex results. ATP oversees a DKK 694 billion ($110 billion) allocation split roughly 80:20 between hedging assets comprising bonds and interest rate swaps, and a return-seeking portfolio.

A key part of the review will focus on how ATP could better communicate its results. The investor’s main value – the interest it earns on its guaranteed pension provision – is not always reflected in financial reporting because communication tends to hone in on the result of its investment portfolio instead.

Yet this constitutes a much smaller part of the total assets, and only contributes to a portion of the overall value creation. The review will include proposals on how the overall value creation of the ATP product can be illustrated and communicated in future reporting, possibly with the help of new key data.

“The evaluation group will provide proposals on how ATP can make it easier in the future to demonstrate how it creates value over time, not only through annual investment results, but throughout the entire pension lifecycle,” Allan Japhetson, head of investment strategy at ATP tells Top1000funds.com.

Yet Japhetson also flags that the need for reporting transparency must not impact returns, or ATP’s competitive advantage for the 5.5 million Danes who save with the institution.

“Such proposals for the demonstration of value creation should balance transparency but not be so transparent that it hurts the future returns for the members of ATP.” 

Additionally the review (modelled on the type of external analysis also favoured by Norway’s oil fund) will assess the decisions and implementation of changes mandated by the Danish Parliament back in 2021, seeking affirmation that ATP’s investment strategy is effective and robust for the long term.

The purpose of the evaluation group is to take a fresh look at whether ATP’s approach is still the right one – and whether there are areas where the investment strategy can be further improved.

The evaluation group, chaired by Jesper Berg, former CEO of the Danish Financial Supervisory Authority and stalwart of the country’s investment industry, together with two to three foreign experts, has had the freedom to examine all parts of the investment strategy within the framework of the law and will report before June 2026.

COMPLEX DRIVERS BEHIND THE INVESTMENT PORTFOLIO

ATP has just reported 2025 returns and in a nod to the reasons behind the review, most analysis has gone into unpicking the 19.5 per cent return in the investment portfolio.

The return allocation comprises the schemes bonus potential plus leverage by borrowing from the bond based hedging portfolio. Using internal leverage, the investment portfolio takes two to three times more risk than a traditional portfolio – it also has a higher proportion allocated to bonds compared to a traditional portfolio.

In a strategy many investors have moved away from, ATP applies a risk balanced approach to how it weights different asset classes in the investment portfolio which is composed of approximately equal amounts of risk in equities and bonds.

“These factors mean that ATP’s returns cannot be directly compared with those of other pension funds, including investors with a more traditional investment approach based on short horizons,” states the fund.

It continues, “the strategy implies that, all other things being equal, ATP performs relatively well when bond prices rise, but performs relatively poorly when equities perform strongly as ATP holds more bonds and fewer equities than a traditional portfolio.”

The fund maintains its risk‑balanced approach can outperform both pure equity portfolios and traditional 60/40 portfolios – and helps stabilise the bonus capacity in the event of interest rate changes. The investment portfolio has an annual return on average of 10.4 per cent.

In an added complexity for beneficiaries, ATP’s assets shrank during 2025 shedding around DKK 24 billion ($3.8 billion) due to rising interest rates.

The same movement was seen in 2022 when interest rates rose sharply in line with inflation – and ATP’s assets plummeted from DKK 947 billion ($150 billion) at the end of 2021 to DKK 677.8 billion ($107 billion) by the end of 2022.

ATP’s most recent performance was driven by foreign equities which returned 18.7 per cent – 23 per cent of the equity allocation is to US stocks in an approach that Japhetson said won’t change in 2026. Moreover, because ATP generally hedges its currency exposure it protected the portfolio from the impact of the US dollar weakening some 10  per cent against the Danish kroner in 2025.

“Generally, ATP hedges its currency exposure, which had a positive impact on the overall return in 2025,” he said.

ATP is also unusual amongst peers for its large allocation to Danish assets which account for roughly 40 per cent of the investment portfolio and spans Danish equities, mortgage bonds, property and infrastructure, aligning with growing pressure on Danish pension funds to invest more at home.

Denmark’s Association of Listed Companies, FBV, has called for the pension sector to buy Danish equities in order to reverse a trend of declining numbers of listed companies and an absence of new listings. The number of companies on the main exchange has almost halved from 204 in 2007 to 114 last year.

Low expenses

ATP’s latest returns are also a chance to showcase its low costs.

On the administration side, ATP has lower costs than its peers, particularly in support functions and IT support and on the investment side, the higher degree of internal management and integration of AI is helping reduce costs.

“In particular, we have made significant strides in the use of artificial intelligence, where technology increasingly supports our operations by, for example, collecting information, compiling data and facilitating documentation tasks. AI technology is used with care and within a clear ethical and security framework,” concludes the fund.