Asset Allocation, Investment Policies, and Returns

This chapter describes the investments of Danish pension funds. The first part starts out describing the distribution of pensions savings in Denmark across pension types, pension funds, and guaranteed versus market-based pension products. It then turns to the asset composition, that is, investments, of Danish pension funds. The chapter also describes how Danish pension companies invest in so-called alternative assets. Given that these are typically illiquid assets, their expected returns are relatively high. The historical returns generated by Danish pension funds will also be discussed. The asset allocation and returns of Danish pension companies will be compared to the asset allocation and returns of pension companies in other countries. The chapter finds that it is difficult to argue that Denmark stands out as an outlier, neither positively nor negative, in terms of asset allocation and returns. After having described the investment strategies and returns of Danish pension funds, the chapter turns to the question of how returns might evolve in the future, or, more precisely, how pension funds inform their customers about the return they can expect from their pension savings. Finally, the chapter devotes attention to how Danish pension funds incorporate responsible investments and ESG (Environmental, Social, and Governance) into their investment decisions.