CHAPTER 7

Assets in the Government Funds

The assets of the Social Pension Fund (SPF), the Advanced Technology Foundation and the Preventive Measures Fund are included in the central-government debt and are managed on a consolidated basis.

SPF invested DKK 45 billion in non-callable mortgage bonds at the auc tions in 2009. This purchase hedged the interest-rate risk in connection with the refinancing of subsidised housing.

The Social Pension Fund 7.1

The Social Pension Fund, SPF, was established in 1970, when a special na tion al retirement pension contribution was introduced. Payments to the Fund ceased in 1982, cf. Box 7.1.

The Social Pension Fund	Box 7.1
The Social Pension Fund, SPF, was established by Act of Parliament in 1970. The Act introduced a special national retirement pension contribution of 1 per cent in 1971-73 and 2 per cent in the following years. The proceeds were allocated to SPF and invested in bonds for disbursement of supplementary pensions from 1976. In 1975, it was de cided by Act of Parliament to postpone all disbursements from SPF until 1979. With effect from 1 January 1982, the Act was amended so that the pension con tri bu tions – and thus payments into SPF – ceased. It was decided that the interest earned on SPF's portfolio of bonds was to be used for pension improvement measures. The years 1986-95 saw annual transfers from SPF corresponding to 1.5 per cent of its assets. In 1996, the principles were amended to the effect that the core capital may also be used for pension improvement measures. The amount to be transferred from SPF to the Ministry of Employment is stipulated in the annual Finance Acts. Since 1996 the core capital has gradually been reduced as the annual transfers have exceeded interest income from the SPF bond portfolio, cf. the Chart.
SPF's portfolio of bonds
Note: For 2008 and 2009, the chart includes non-callable mortgage bonds with value date the first business day in the new year. For the years 1970 to 1983 a breakdown between government securities and mortgage bonds etc. is not possible.

SPF is managed by a committee with representatives from the Ministry of Finance, the Ministry of Employment and Government Debt Man age ment. The day-to-day management of the assets is undertaken by Gov ern ment Debt Management according to principles set out in a set of regu lations. SPF's assets may be invested in Danish listed bonds – including index-linked bonds and mortgage bonds – taking the government debt pol icy into account.

The Finance Act stipulates the amount to be transferred to the Ministry of Employment on an annual basis to cover the costs of pension im prove ment measures. If the sum of the amount transferred to the Ministry and pay ments of pension-yield tax exceed SPF's interest income, the core cap ital is reduced.

The risk on SPF's assets is managed separately, but is included in the con solidated risk management of the central-government debt. At the beginning of 2010, the duration of the SPF portfolio was 4.0 years, cf. Table 7.1.1.

In 2009, DKK 10.2 billion was transferred from SPF to the Ministry of Employment, cf. Table 7.1.2. SPF paid pension-yield tax of DKK 1.0 billion and had interest income of DKK 6.4 billion, leading to a DKK 4.7 billion reduction in the core capital. At end-2009, SPF's assets totalled DKK 120 billion, cf. Table 7.1.3.

SPF invested DKK 45 billion in non-callable mortgage bonds at the auctions in 2009. This purchase hedged the interest-rate risk in connection with the refinancing of subsidised housing loan portfolios of 1-, 3- and 5-year non-callable mortgage bonds

The Advanced Technology Foundation 7.2

The Advanced Technology Foundation was established by Act of Par lia ment in December 2004. The objective of the Foundation is to strengthen growth and employment by supporting Denmark's further development as an advanced technological society. The aim is to build up the Foun da tion's capital to at least DKK 16 billion by 2012. In accordance with the 2010 Finance Act, DKK 2 billion was transferred to the Advanced Tech nol ogy Foundation in January 2010.In 2009, the interest income of the Advanced Technology Foundation was DKK 377 million, while DKK 280 million was transferred from the Foun dation to the Ministry of Science, Technology and Innovation, cf. Table 7.1.2. At end-2009, the assets of the Foundation totalled DKK 10.4 bil lion, cf. Table 7.1.3.

The capital of the Foundation may be invested in Danish government bonds only. The investment strategy for the Advanced Technology Foun da tion is to seek to achieve an equal distribution on short-, medium- and long-term Danish government bonds.

The Preventive Measures Fund 7.3

The Preventive Measures Fund was established in 2007 for the purpose of supporting projects to forestall and prevent physical and mental im pair ment. A contribution of DKK 3 billion was made to the Fund when it was established. There are no plans to build up further capital in the Fund.Every year, DKK 350 million is paid by the Fund to the Ministry of Em ploy ment. In 2009, the Fund's interest income amounted to DKK 104 mil lion, resulting in a net reduction of DKK 246 million in the Fund's assets, cf. Table 7.1.2. At end-2009, the assets of the Preventive Measures Fund totalled DKK 2.3 billion, cf. Table 7.1.3.

It is a statutory provision that the assets of the Fund may be invested in Danish government bonds only. The investment strategy of the Pre ventive Measures Fund will be aimed at achieving revenue from interest and redemptions to match future transfers to the Ministry of Employment.