DänemarkThe two biggest funds in the world’s top performing pension market just delivered some of their best returns ever. But their results may be a cause for concern.

Part of the reason they did so well was that virtually all asset classes in their portfolios rose in value in the first half of the year. At ATP and PFA, which oversee a combined $230 billion from their headquarters in Denmark, the worry is that the near lock-step movement of bonds and stocks will make it hard to limit losses through diversification, once markets turn.

Allan Polack, the chief executive officer of Copenhagen-based PFA, says that the “diversification models that we have all been working with — you can question the degree to which they actually work, because this year, bonds and equities have moved in the same direction.” He spoke after unveiling the fund’s best half-year return rate ever.

At ATP, CEO Bo Foged says it’s a situation that demands extra attention to risk management. That includes “asking risk employees an extra time that they’re sure about diversification” and getting people to “do more stress testing, so that one understands what the effect of this could be.”

Last week, ATP reported an adjusted rate of return of about 32% for the first six months of the year, roughly double what’s normal for the fund. Foged says the tandem movement across asset classes doesn’t bode well, especially given fears of a recession. “If it can go up, it can also go down,” he said.