Two Danish pension funds have revealed they made profits of DKK500m (€67m) or more on the financial markets in the first two months of this year from the effects of the wave of currency speculation on the Danish krone.Labour-market pension fund Sampension and PKA, which runs three labour-market pension funds, made quick gains of DKK500m and DKK600m, respectively, in January and February as the Danish central bank (Danish National Bank) fought off upwards pressure on the krone partly by dropping some interest rates into negative territory.The krone had attracted heavy buying from speculators after the Swiss National Bank surprised markets in January by abandoning the Swiss franc’s peg to the euro.The European Central Bank’s (ECB) announcement that it would start large-scale quantitative easing later this year also created buying pressure for krone. The Danish National Bank has since said two-thirds of the krone buying in January and February came from domestic pension funds, insurers, investment funds and companies seeking to hedge different kinds of euro assets by buying kroner in the form of futures.Kasper Ullegård, head of fixed income at Sampension, told IPE: “We had previously established a relative position where we would benefit if Danish interest rates fell more than euro rates (…) and that’s what happened when the krone came under pressure.” In the second half of 2013 and the first half of 2014, Sampension had bought Danish government bonds and sold euro-denominated, high-quality government bonds, issued by countries such as Germany, Finland and the Netherlands.It had also been buying Danish mortgage bonds and selling euro-denominated, AAA-rated covered bonds.As well as this, in the derivatives markets, it had been buying receive fixed, pay floating in krone interest rate swaps (IRS) and pay fixed, receive floating in euro interest rate swaps – matching maturity for the krone and euro swaps.“When we did all this, we had no idea that was going to happen,” said Ullegård. “We thought the Danish economy was sound, so there was no way interest rates would exceed euro rates on a prolonged basis – we would argue that the opposite should be true.”Since Denmark operates with a significant current account surplus, with capital flowing into Denmark every day, that money needs to be diverted with low comparative interest rates set by the central bank, he said.Effectively, Sampension was betting on Danish interest rates being lower than euro rates, and when that scenario became exaggeratedly the case, for a phase at least, it closed positions to take the profit.“This was more than what we hoped for,” Ullegård said.Although he believes there could yet be another wave of speculation pushing the krone, Sampension firmly believes the Danish National Bank will succeed in maintaining the peg.“It won’t break because it’s institutional – it is clearly the primary goal of Danish central bank policy,” he said.Meanwhile, Pension fund administrator PKA, which runs three labour-market pension funds, also made a large profit in the first two months of this year on the foreign exchange markets as a result of the sudden drop in krone interest rates.The company hedges its currency exposure using forex forwards, effectively selling dollars and buying Danish krone, to avoid having to pay a high capital charge due to regulatory rules.Inger Huus Pedersen, head of fixed income at PKA, told IPE: “In January, obviously some in the market thought the krone should appreciate.“When you have krone forwards, and Danish interest rates fall, you make money.”Huus Pedersen and her team reacted to the changed market conditions with a tactical move, changing the forex hedges into contracts that hedged euro, rather than the domestic currency, against dollars.The regulation allows pension funds to hedge foreign currency exposure against either kroner or partly euro.“The net result was that we earned around DKK600m on the transactions, some of it realised and some not,” she said.Huus Pedersen said PKA would not have switched its hedging from kroner to euro unless it was absolutely certain the krone would not be detached from its peg to the euro.“The law allows pension funds to hold so much euro unhedged assets, that this is an implicit confirmation of the peg to the euro,” she said.
Press Association Ian Poulter believes Rory McIlroy needs to go his own way to rediscover the form which brought him two major titles by the age of 23. McIlroy missed the cut in last week’s Open Championship at Muirfield, labelling his own play “brain dead” following an opening round of 79. The 24-year-old Northern Irishman won five times last year, including his second major by eight shots in the USPGA Championship, to finish top of the money list on both sides of the Atlantic. But he has yet to record a win in 2013 since a controversial multi-million pound switch to Nike in January, also damaging his reputation by walking off the course during his defence of the Honda Classic and bending a club out of shape during the final round of the US Open last month. Asked if he had any advice for his Ryder Cup team-mate, Poulter said: “Stop reading the newspapers, stop listening to other people, go out there and do your stuff. “There is a reason he was sought after by a new manufacturer and why they pay the big bucks because he is that good. He’s just going to have to settle into the equipment, settle into himself being in a different environment now. “The expectations after winning both money titles, there is some comedown after that. He just has to go out there and be himself.” Speaking at Woburn during his junior invitational event, Poulter added on Sky Sports News: “He knows how good he really is and the second he gets comfortable again you are going to see him winning golf tournaments. “You don’t win two majors by the age of 23 and disappear. Rory is here for a long time and he is going to be back at the top very soon.”
…WADA formally responds to US report demanding reformMONTREAL, Canada (AFP) — The World Anti-Doping Agency (WADA) formally responded to a US Government report that recommended lawmakers be given power to withhold funding from the global drugs watchdog in the absence of governance reforms.In a letter to James W Carroll, director of the Office of National Drug Control Policy (ONDCP), WADA President Witold Banka reiterated the agency’s “disappointment” at what WADA says are factual inaccuracies in the report as well as a lack of consultation as it was compiled.“Given that, during our 12 June telephone meeting, we discussed a renewed spirit of cooperation, I would have expected your office to have consulted us on the report or, at the very least, to have verified the factual veracity of the allegations being made against WADA,” Banka wrote.“Instead, in the days before publication, you informed us of the impending report and asked us to verify three paragraphs by a certain deadline; and when we did so in good faith, you chose not to incorporate our clarifications.“As the saying goes, ‘why let the truth get in the way of a good story?’ “Banka attached a summary of WADA’s views on the report, reiterating the agency’s view that it was littered with “multiple inaccuracies, misconceptions and falsehoods”.The ONDCP study released this week questioned whether the United States was receiving value for money for its contribution of US$2.7 million per year to WADA.It urges reforms to include independent athlete and anti-doping representatives on WADA committees and decision-making bodies.It also called for WADA leadership to be “free from undue influence by sports organisations with a direct financial interest in WADA decisions”.WADA noted that governance reforms have already been undertaken, with the approval of US representatives.Reforms already implemented include formation of a nomination committee to ensure independent, appropriately skilled people are recruited for senior governance roles, and stipulation that seats on all standing committees be reserved for both athlete and national anti-doping organisation representatives.Term limits have been set for members of the WADA board, executive committee and standing committees.“I remain convinced that the US Government has an important role to play in protecting clean sport,” Banka wrote, “and it is my sincere hope that, going forward, we can work collaboratively rather than WADA having to defend itself against unfounded attacks via the media – which do absolutely nothing to advance the global anti-doping programme for athletes worldwide.”