Direct real estate returned 15% for Pension Fennia in the nine months to September, outperforming the remainder of the pension insurer’s portfolio, including equities.

The strong performance came as LocalTapiola, the €10.3bn rival set to merge with Fennia’s €8bn pension division at the beginning of 2014, only achieved a year-to-date return of 3.5%, significantly behind the 6.3% posted by Fennia.

Fennia outperformed Tapiola across all main asset classes, achieving 0.6% growth from fixed income compared with the slight loss of 0.1% seen by Tapiola’s portfolio, accounting for nearly 45% of assets.

Despite returns in excess of 21% from its Finnish equity portfolio, Tapiola’s overall equity return came in at 9.17%, behind the 13.3% from Fennia’s stocks and, at 14.7% for its listed equity, nearly 5 percentage points ahead of Tapiola’s equivalent holdings.

Eeva Grannenfelt, CIO at Fennia, said: “The grim outlook in the equities market at the start of the summer was followed by an especially good third quarter. The markets further picked up with the US Federal Reserve’s announcement concerning the continuation of its expansive bond-buying programme.”

Fennia noted that the best investment returns came from its directly held real estate portfolio, re-valued ahead of the merger.

As a result of the valuation, Fennia said its 13.4% overall return was boosted by 0.5 percentage points.

However, its €1.1bn in direct property holdings significantly outperformed its property funds, returning 15% compared with 6.5%.

Tapiola also saw its direct property outperform fund holdings, although real estate returned only 2.3% in the nine months to September.

Despite a worse performance compared with Fennia, Tapiola nonetheless outperformed over the longer term, seeing 6% growth per annum over the last five years compared with 5.9% from Fennia.

Over the past decade, Fennia marginally outperformed Tapiola, ahead 0.2 percentage points at 5.4%.

The providers are set to merge and be renamed Elo Mutual Pension Insurance at the beginning of the year.