FINLAND - Finnish pension funds saw disappointing first quarter returns as Etera Mutual Pension Insurance Company reported a negative return of -3.8%, while Valtion Eläkerahasto (VER), the Finnish state pension fund, reported a negative yield of -4.6%.

The interim report for VER showed the value of its investment portfolio had increased over a 12-month period from €10.8bn in March 2007, to €11.5bn at March 31 2008, although the yield on investments was -4.6% compared to a return of 1.4% in the first quarter of 2007.

Figures from the report revealed 56%, or €6.5bn, of the portfolio assets are allocated to fixed income, while €4.3bn, or 37%, is invested in equities, and the final 7% of the portfolio is placed in other investments.

Meanwhile, Etera blamed the "instability of the stock and credit risk markets" for its poor return between January and March 2008, as the value of investments fell from €6.1bn at December 31 2007 to €5.8bn at the end of March.

That said, the pension insurance company revealed its solvency position "remains good" at 25.2%, as investment loans and real estate provided the best returns for the first quarter of 1.2% and 1.3% respectively.

As a result, Etera confirmed the fund's share of real estate investments increased from 14% to 15% over the three months, although it pointed out this was "less the result of new investments than it was the result of a decline in other investments due to market fluctuations".

Figures from the first quarter showed bond investments produced a profit of 0.6%, although it said the profit was generated primarily through bonds involving sovereign risk, as corporate bond performance was "poor".

In particular, Etera noted government bonds were an "excellent investment target" in the first quarter as they "benefited from the uncertainty in the stock and credit markets" because of their "stability and predictability".

However, the firm's 33% allocation to equities produced a negative yield of -11.8%, as returns were affected by the weakening of the US dollar against the euro, "even though the situation was eased by currency rate hedging", according to Etera.

Although the firm said equity investments "yielded quite consistently negative returns", it pointed out the best returns were generated by Finnish equities which returned -6.9% over the period.
Etera also said March was a particularly difficult time for hedge fund performance, as the Credit Suisse Investable Index, which broadly monitors hedge fund returns, yields -2%, hedged against currency risk, while the fund's absolute return investments produced returns of -2.8%.

In addition, Etera confirmed it is no longer part of the Kevitsa mining project, after the operating company, Scandinavian Minerals - in which Etera invested €11m at the end of 2007 - was purchased by a subsidiary of First Quantum Limited, a Canadian company, for €175m in April 2008.

The investment in the multi-metal mine in Lapland was expected to be "highly profitable" with the mine estimated to last 15 years from its operating date in 2010. As a result Mika Pesonen, chief investment officer at Etera, said, "this investment, which turned out to be short-term, was good for us, but could have been even better in a few years."

Elsewhere, the Finnish Local Government Pensions Institution (Keva) has revealed the average monthly pension for local government employees increased 5.3% between 2006 and 2007 to €1,540.

However, the research - which is available in a recent statistical yearbook on local government pensions - showed there is a "big difference" in the amount of pensions received by different professions.

It showed, for example, in 2007 physicians received an average monthly pension of €4,136, while the average pension for cleaning staff was €963 - over four times less than doctors - although Keva pointed out the variation in incomes are because of "factors such as salary differences and differences in the length of working careers".

Directors in the social and healthcare sectors received the second-best pension of €2,245 a month, closely followed by ward managers on €1,857, while teachers received on average €1,753.

At the other end of the scale, home-helpers and assistants received on average just €1,136 a month, hospital orderlies and assistants received €1,094 while kitchen staff and family day care providers had an average pension of €1,055 and €1,054 respectively.

Tthere are currently three different retirement options for local government employees at present; old-age pension including early retirement; disability pension, and unemployment pension, however the latter is in the process of being abolished.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email