nrpn: 2009 was a rollercoaster of a year, with many funds recovering the losses they suffered in 2008. Your fund, however, did not appear to have high returns, only about 0.6 per cent according to the interim mid-year 2009 report. How would you describe last year?

It was satisfactory. We are more of an insurance company than a pension fund, so while we also have obligations, we have to be very careful with our risk appetite. We are not the kind of organisation that likes to take too much risk, and as things became difficult in 2008 we realised we had to reduce our risk. Our credit bonds have done quite well and so have our equities, but the allocation to equities was low in 2009. Maybe we were too careful and this hurt us when markets came back, but overall I am happy with our steady performance.

nrpn: How do you think your strategic asset allocation will change in the next 12 months?

Our assets are mostly in equities and bonds, and some real estate. As we see it, risky assets should have another plus year. We are looking at which assets might have higher risks going forward. We are inclined to reduce our exposure to high yield and replace them with equities as they look cheaper and should have support from the cyclical upswing. However, there will be more corrections this year than in 2009, and the returns generally will be less. So it’s important to be flexible and liquid.

nrpn: Your solvency level is 172 per cent. Do you think this might be too high?

No, we are actually quite comfortable with such a high level. If the financial crisis taught us anything, it’s that you can never be too solvent or careful. There is also the soon to arrive Solvency II legislation. We know that this will increase the solvency requirements for funds across Europe, and we have to be ready for that. So if you look at it from that perspective, you could say that this 172 per cent figure is a number we consider robust. It is important for us to have high solvency, and this importance can only increase.

nrpn: In the last year, PFA underwent a significant restructuring. Firstly, you purchased Nordic Asset Management and formed your own asset management division [PFA Asset Management]. Why did you decide to do that?

We believe that asset management is a good future business area for PFA’s growth. In the market, there are lots of small pension funds that have trouble operating independently. With our new setup, we can take some of them on as clients, whereas under our old structure this was much more difficult. So we hope to increase this business of ours in the future. This was one of the main reasons behind the purchase of Nordic Asset Management. It was an opportunity to achieve economies of scale within the pension industry as this company manages about DKr28bn (e3.76bn).

nrpn: Creating an asset management company is an interesting move. However, the market seems somewhat saturated. Why would they choose you instead of a more established and experienced firm? Also, who are you targeting for business, and could you potentially look outside of Denmark?

We’re not targeting everyone, as we believe we should be going after the smaller funds that need support. I don’t think our competitors would use us, but the small ones will. We are also looking at mandates as opposed to taking on an entire pension fund’s assets. There is always the possibility that we could look at foreign schemes, but for the moment we will start here in Denmark. We will target all pension funds where we see a future business opportunity. Our main product is life pensions, but to get access to a broader customer base, we supply asset management, health concepts and other products with the hope that this relationship can develop.

nrpn: You have also restructured your organisation and increased the membership of the executive board from one to four members. What prompted those changes?

We felt it was better for the company. At the start of last year, I was the only board member, and that could be difficult at times. So we worked to set up a new team and structure, which was finished in August. It is difficult to depend on only one person on the executive board. Now the responsibilities are more spread out and the company is better protected. The four of us share responsibility for things like finance, risk management, investments, IT, customer service and marketing.

nrpn: How do you feel about the current Danish investment regulations for pension funds?

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