Low interest rates will pose major challenges for Finland’s State Pension Fund (VER), which achieved quarterly returns of 7.4% despite its sizeable fixed income portfolio returning only 1.8%.
The €18.7bn scheme, used to pre-fund state pension liabilities, saw performance boosted by the 16.7% returns from equities, which it credited to the European Central Bank’s more aggressive monetary policy and a weakening euro over first three months of the year.
Acting managing director Maarit Säynevirta said the equity return was “excellent”.
“Both in equities and fixed-income instruments, the positive market developments were boosted by the reflationary monetary policies adopted by the central banks,” she said.
“In the future, the low general interest rates will pose major challenges in terms of investment returns.”
Nevertheless, VER said returns on fixed income holdings, which account for half its assets, were higher than expected, at 1.8%.
“In absolute terms, the best returns were earned on emerging market debt, which benefited from the sustained flow of investments to riskier asset classes,” the fund said.
Alternatives, and its portfolio of ‘other’ investments including absolute return funds, fared less well, returning 0.8% and 0.9%, respectively.
The board of VER also announced that Timo Viherkenttä had been named managing director, taking over responsibilities from Säynevirta in June.
Viherkenttä, a lawyer by training, spent eight years at local authority pension provider Keva as deputy chief executive, but left in 2010.
Prior to this, he spent four years as budget director at the Ministry of Finance, and more recently returned to the ministry, where he was permanent under-secretary responsible for tax policy.
He has also served as chairman of the board of directors at the Finnish National Gallery, has taught law at the University of Helsinki and is a member of the Supreme Administrative Court.
The position of managing director became vacant after Timo Löyttyniemi moved to Brussels after being named vice-chair of the new Single Resolution Board for euro-zone banks.
Säynevirta will return to her current role as head of alternatives.