Finland’s Ilmarinen has warned of the detrimental impact on European growth of widening economic sanctions brought by – and against – Russia.

Timo Ritakallo, CIO at the €33.6bn pensions mutual, stressed that the portfolio’s risk exposure to Russia was lowered well before the crisis in Ukraine began.

Ilmarinen is, however, a major owner of listed Finnish companies,” he said, “so our portfolio could still be exposed to some indirect negative impacts.”

The pensions provider nevertheless saw a return of 3.4% for the first six months of the year, aided largely by 5.5% returns from its equity portfolio.

While the returns from share holdings were down over the same period last year, Ilmarinen managed to outperform results from the first half of 2013 by 0.4 percentage points.

Fixed income returns were above the same period last year, at 2.2%, while the mutual’s direct real estate returns were on par with the first six months of 2013.

Chief executive Harri Sailas stressed the importance of a diversified portfolio, noting that the mutual’s approach had allowed it to weather the current environment.

“The current economic challenges, such as the low interest rate level or Finland’s weak economic state, have not shaken our customers’ pension security,” he said.

Ritakallio said ongoing geopolitical risk was causing a “headache” for investors and “rattling nerves” in both equity and fixed income markets.

He also said he saw the current situation involving sanctions against Russia and counter-sanctions against European Union products as a “disconcerting” factor for Finland’s economy.

“The EU’s economic sanctions against Russia and the latter’s countermeasures to the sanctions are weakening the economic outlook for all of Europe,” he said.

“The negative impacts will be especially significant in the profit outlook of Finnish companies that have business ties with Russia.”