KLP is a mutual insurance company, in other words, our insurance customers are also our owners. And as owners our customers have a special interest in KLP's financial strength and earnings.
Therefore KLP gives great priority to providing its customers and owners with a competitive, but at the same time stable, return on their pension savings. The Company places emphasis on building the financial strength that provides the necessary freedom to take calculated risks in financial management.
KLP's risk profile
KLP has an investment mix in which almost 15 per cent is invested in the equity markets where both the earnings opportunities and risks associated with the investments are greatest. As a balancing factor almost 50 per cent of the remainder is invested in stable investments that provide good current returns. These are generally hold-to-maturity bonds, lending with good collateral and investments in high quality property with long leases. The remainder of the financial portfolio comprises mainly short term bonds and money-market investments.
KLP continuously monitors its risk picture and follows a trading rule that triggers reduction of the most risk-exposed financial investments in falling markets, whereas good markets provide the freedom to increase the risk in the portfolio.
The objective is to make the asset management as efficient and cost-saving as possible. KLP has therefore developed advanced models that make it possible to run what is known as index-tracking management at very low cost. Index-tracking management means that one invests in securities portfolios with a value gradient barely deviating from the value gradient in the market in which one is investing, whether it is the Oslo Børs, the New York Stock Exchange or an international bonds market. The majority of our international securities investments aim to follow the markets, not to beat them.
But we also have a specialised team whose task is to manage smaller, specialised securities portfolios in which the aim is to select individual securities or industries with better development than the average in the market - and in this way to create an additional return.
Cost-effective funds for everyone
KLP’s index-tracking management also forms the building blocks in KLP Kapitalforvaltning's index-tracking funds, which have received a broad and good acceptance in the market.
Not only can broader customer groups enjoy the benefits of KLP's expertise in index-tracking management, but it also contributes to spreading the management costs across a larger number of customers - which produces a more reasonable pension product.