Danish pension company Velliv reported that, for the year to date up to 20 September, a typical customer with a medium-risk profile and 15 years to retirement achieved returns of up to 6.3 per cent, despite continued uncertainty in financial markets.

Velliv chief investment officer, Lea Vaisalo, partially attributed the “attractive returns”, which ranged between 3.9-6.3 per cent, to the company’s new investment strategy introduced in the summer of 2024.

This strategy, she said, “has delivered solid top returns to customers during a period of both ups and downs in the financial markets”, which she said shows that Velliv’s new approach to its investments has the “desired robustness”.

Another factor behind the strong returns was the company’s active investment decisions, including hedging against a weakening dollar, positioning itself around US interest rate cuts, and maintaining a generally positive market outlook.

A further contributor was a tailwind in the equity markets, where expectations of US interest rate cuts helped, which also boosted returns on bonds.

Velliv said that overall, despite the market turmoil, the return has been positive as its spring losses have now been converted into gains, with expectations that this trend will continue throughout the year.

However, the company also warned that there will be fluctuations in returns driven by economic developments, political initiatives and the geopolitical situation along the way, with the developments in the US and Europe in particular setting the agenda.

In particular, it highlighted that the US economy has shown “clear signs of weakness”, including a marked decline in job creation during the summer, at a time when inflation has risen due to US President Donald Trump's tariffs.

So far, however, Velliv said it seems that companies are “biting the bullet” and taking some of the costs themselves.

The company said it expects inflation to continue to rise and that if it happens, it would erode consumers' purchasing power, negatively affecting economic growth.

In addition to this, Velliv said it expects two more interest rate cuts in 2025 to stimulate the economy, following the US Federal Reserve's interest rate cut at its monetary policy meeting last week.

However, these cuts also increase the risk that inflation in the US will remain above the target of 2 per cent.

Meanwhile, in Europe, Velliv said uncertainty is relatively smaller but still present.

In France, political turmoil is linked to necessary budget tightening, and despite a change in government, the company expect some tightening of fiscal policy to continue.

In Germany, the market is waiting for a major fiscal package designed to boost growth, and if it goes ahead as planned, it is likely to push interest rates higher. The impact on Denmark’s economy will depend on how much growth and inflation the package generates.

The European Central Bank is currently satisfied with the economic development and is not expected to cut interest rates further this year.

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