​Nordic pensions heavyweights look for silver lining amid limited Q1 losses

The mightiest pension funds of the Nordic region have reported narrowly negative to flat investment returns for the first three months of the year, ahead of April’s wild ride for the world’s stock markets, with institutions from Oslo to Helsinki evidently keen to point out the positives in their latest quarterly reports.

Norges Bank Investment Management (NBIM), which runs Norway’s Government Pension Fund Global (GPFG) reported a 0.6% investment loss for the first quarter, with the sovereign wealth fund’s value falling to NOK18.5trn (€1.57trn) by 31 March from NOK19.7trn at the end of 2024.

However, last week’s report also showed active management and allocation saved the fund from worse losses in the three-month period, with that return being 0.16 percentage points better than the benchmark.

This comes after two years of underperformance for NBIM, which manages the GPFG close to a benchmark index composed of equities and bonds.

Nicolai Tangen, NBIM’s chief executive officer, said the quarter had been impacted by significant market fluctuations. “Our equity investments had a negative return, largely driven by the tech sector,” he said.

In 2024, NBIM admitted it missed out on some equity market gains after underweighting big technology companies in a bid to protect the SWF from precarious valuations.

Deputy CEO Trond Grande warned in January of the increased concentration risk arising from the stock market dominance of US tech companies, with the largest 10 firms making up almost 20% of the GPFG’s equity portfolio at the end of 2024 – up from around 8% in 2017.

ATP boss stresses importance of guarantees

In Copenhagen on Tuesday, statutory pension fund ATP reported a further reduction of its overall assets to DKK689bn (€92.3bn) as of end-March, from DKK718bn at the end of 2024 – largely reflecting the development of its huge hedging portfolio, which exists to protect guaranteed pensions.

That portfolio contracted at the same rate as the value of guaranteed pensions, which fell by DKK26.7bn in the three months, ATP said.

However, the investment portfolio, consisting of the bonus potential or free reserves used to seek absolute returns in order to maintain the purchasing power of the guaranteed pension, suffered a loss of -0.8% in the first quarter, ATP reported.

“Despite the turmoil in the global financial markets, listed foreign equities produced a positive result while investments in Danish listed equities and Danish and global bonds contributed negatively during the period,” said the pension fund, whose business model has often come in for criticism domestically.

Martin Præstegaard, ATP’s CEO, said: “However, ongoing fluctuations in markets and returns do not change the fact that the guarantees for a lifelong and fixed pension we have given Danes remain in force, and it is certainly not unimportant that Danes will get the pension they expect at a time when so much else is unpredictable.”

Alecta’s DB scheme keeps Q1 losses at -0.8%

Sweden’s biggest pension fund Alecta reported -1.0% overall investment loss for the first quarter, with its key DC product, Alecta Optimal Pension, losing 2.0%, and the defined benefit (DB) product – much larger in terms of assets – keeping its investment loss to a narrower 0.8% in the period.

At the end of last year, Alecta announced that among changes to its DB scheme, it was reducing the normal portfolio’s equity allocation to 30% from 35%.

Reporting Q1 results last week, the white-collar occupational pensions giant’s total group assets remained at around SEK1.3trn (€118bn) by the end of the quarter, little changed from the end of last year, while its solvency level dipped to 197% at the end of March, from 201% at the same point a year earlier.

Overall, equities – including currency effects – resulted in a 3.8% loss for Alecta in the first quarter, the pension fund said.

“Although the stock market development in March was significantly negative on both sides of the Atlantic, the quarterly result was positive for the stock markets in Europe and Sweden, which rose by 3.7 and 6.4% respectively,” it said.

The US equity market, on the other hand, had fallen by 4.5% during the quarter, Alecta added.

In the current volatile market climate, it said, the Swedish krona had strengthened significantly – by almost 5% against the euro and 9% against the US dollar.

Finland’s Keva reports a -1.2% return for the quarter as peers gear up to take more risk

In Finland, local government pension fund Keva reported a -1.2% investment loss for the first quarter – losing more than its peers on the private-sector side of occupational pension provision, Varma and Ilmarinen.

Those two mutual pension insurers posted returns of 0.0% and 0.2% for January to March.

Keva, which is subject to different investment regulation from the likes of Varma and Ilmarinen, announced back in September 2023 that it would boost its equities weighting.

Varma, Ilmarinen and other private-sector earnings-related pension firms are being freed up to invest more in equities by provisions in the pensions reform agreed earlier this year.

Keva CIO Ari Huotari said on Tuesday that uncertainty had put downward pressure on almost all risky investments on the capital markets, with the traditional safe haven status of the US dollar and government bonds having been called into question.

“It will be interesting to see how long-term the consequences of the unrest seen at the beginning of the year will be,” he said.

At Varma, president and CEO Risto Murto said that, unusually, European equity markets had outperformed the US market in the first quarter of the year, which had helped improve Varma’s Q1 returns.

“Diversification paid off once again,” he said.

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