Now is the most interesting from an investment point of view because it is an offshoot of a fully-formed pension provider with a big reputation and 4.7m members. Its parent is ATP of Denmark, which was set up in 1964 to administer a compulsory pension scheme intended to be a back-up to the state pension. Every Danish income earner - including benefits recipients - pays ATP £9 a month via deductions at source. Their employer or the state pays a further £18.
This contribution base pays a pension of about £200 a month to a contributor with a full contribution record, representing a supplement of about 30 per cent to the state pension; 80 per cent of retired Danes receive an ATP pension.
The funds accumulated by ATP over 50 years have become a pretty sizeable pot - about £70bn. It is managed in a sophisticated way by in house teams. The Danish Financial Supervisory Authority reckons ATP produced an average annual return of 9.4 per cent between 1991 and 2011, rising to 10.3 per cent since 2001. This is excellent by any standards and is 2.4 per cent per year more than ATP's Danish peer group. However, this has not been achieved by clever stock-picking. Rather it was driven by ATP's investment strategy of attempting to achieve a 100 per cent match for its pension payment obligations by investing in very long bonds and interest-rate swaps.
This "hedging portfolio" deploys about two-thirds of ATP's assets. As interest rates on high-quality bonds have fallen consistently since the financial crisis, ATP's play-safe hedging strategy has added a windfall element to its investment profits. Last year, falling interest rates lifted the value of ATP's pension obligations by Kr91bn. The corresponding portion of its hedging portfolio delivered a return of about Kr95bn. It doesn't always work this well, but it works pretty well on average (and in years when interest rates rise and reduce the value of pension obligations, the hedging portfolio will deliver a corresponding loss).
Having squared off the big risk via its hedging portfolio, ATP runs a rather smaller investment portfolio, which is intended to generate the returns that will in due course enable it to reinstate pension increases to cover inflation. But even here, there's not much stock-picking; 98 per cent of this portfolio is invested in "beta strategies" intended to reap the market return from five core investment areas, being interest rates, equities, inflation-linked bonds, corporate bonds and a small exposure to commodities, primarily oil. Only 2 per cent of the investment portfolio is reserved for stock-picking-based "alpha strategies". This is run in a hedge fund manner, focusing on price discrepancies between pairs of assets rather than on fundamental values. ATP hopes to develop "alpha" further in coming years.
The investment portfolio has delivered positive returns in four of the past five years, including excellent returns in 2011.
Robust investment results are predictably backed up with very low expenses, with direct investment costs running at just 0.05 per cent of funds under management.
ATP aspires to keep its pensions pegged to inflation: it has not met this target for several years due to the impact of increasing longevity. In 2010, however, it made a huge provision to address all expected further increases in longevity. With that provision in the bag, as of December 2011, ATP reckoned its assets covered its liabilities at a rate of 114 per cent. It says it won't increase pensions until it has lifted its cover to 120 per cent.
There are undoubtedly some lucky aspects to the profile ATP currently represents to UK savers who look behind its new UK offshoot, but it certainly has a long, consistent and disciplined record.
Touch wood.
