Finland’s Veritas Pension Insurance has announced “excellent” first-quarter returns of 5.5% from its investment portfolio – worth €2.6bn as at 31 December 2014 – chiefly because of its listed equity performance.

The pensions insurer said that while the return on the whole equity portfolio was 11.9%, listed stocks returned 14.3% over the three months to 31 March 2015.

The overall equity return was a reflection of equity markets performing especially well in Europe, it added.

Nina Bergring, the company’s CIO, said: “The market’s trust in the recovery of the European economy strengthened clearly in response to the launch of the quantitative easing programme by the European Central Bank at the start of the year.”

She added: “In Europe, share prices rose significantly more than in other markets, and overall interest rates fell to a record low level.

“The interest rates on German government bonds are currently negative for maturities of up to eight years, and the rate on 10-year bonds is also approaching zero.”

The fall in interest rate levels helped Veritas achieve a 2.6% return from its fixed income allocation.

However, Bergring said the pursuit of higher yields meant increased risk-taking.

She said actions by central banks had increased liquidity in the market, which had the effect of forcing long-term investors to shift from safe asset classes to riskier investments in the hope of returns.

“The problem for long-term investors is no longer just low yield expectations for medium-term investments but also the fact that, from this point on, the advantages of diversification that have in the past helped to secure the portfolio are likely to be almost non-existent,” she added. 

Turning to the immediate future, Bergring warned that the return for the rest of the year would be affected at the very least by the situation in Greece, and by future liquidity measures taken by the US Federal Reserve Bank.

She also drew attention to the slowdown in China’s economy, which continued during the first quarter of the year.

Bergring said a question mark remained over how skilfully the Chinese government would manage the deceleration.

Meanwhile, Veritas’s solvency strengthened throughout the quarter, with solvency capital equal to 33.6% of technical provisions as at 31 March.

Solvency capital is now 2.5 times the solvency limit.