FINLAND – Two of Finland’s government pension funds saw strong returns in 2012, boosted largely by double-digit results from listed equity holdings.
CIO Ari Huotari, responsible for the pensions of Finnish municipal employees at €34.4bn Keva, was not optimistic the fund would be able to replicate its 12.9% return in 2013, a significant improvement from the 1.7% loss suffered in 2011.
Valtion Eläkerahasto (VER), the €15.4bn Finnish state pension scheme used to pre-fund the country’s pension liabilities, saw returns similarly rebound from a 2.3% loss in 2011 to 11.3% at the end of December.
Both funds saw 2012’s fortunes boosted by listed equity.
Where VER made a 12.3% loss in the asset class in 2011 – comparable with Keva’s 10% loss over the same period – the former saw returns of 16.8%, while the fund for municipal employees saw even stronger returns of 17.2%.
Fixed income investments, accounting for around half of both portfolios, were similarly improved at both schemes, up 8 percentage points year-on-year at Keva and 4.3 percentage points to 8.8% at VER.
Huotari said the past year saw unpredictable capital markets, a fact he had become accustomed to since the onset of the financial crisis.
“It is difficult to imagine that 2013 will turn out to be as successful an investment year as 2012, especially with the low yield potential for fixed income investments,” he added.
VER’s managing director Timo Löyttyniemi was similarly uncertain about the outlook for this year.
“For the future, the expectations lay on the assumption that the low interest rates will gradually begin to drive the global recovery,” he said.
Overall, Keva saw positive returns across all its asset classes, with an estimated €1.7bn exposure to private equity nearly tying with hedge funds to come third, returning 10% and 10.4%, respectively.
Meanwhile, its real estate investments returned 4.7% and its commodities holdings 5.2%.
VER, which, despite investing 2% each in private equity and hedge funds and allocating a further 3% to real estate, only reports an overall return for its alternative investments, which stood at 3.5%.