Finland’s State Pension Fund (VER) has partly blamed “historically weak” equity markets for a drop in its first-quarter returns, with listed stocks declining by more than 4% in value.

The €17.6bn pension buffer fund, explaining the 0.8% loss over the first quarter, said equity and fixed income markets were “extremely jittery” over the course of January and February

But it said the outlook had improved since mid-February after oil and other commodity prices began improving.

Managing director Timo Viherkenttä said markets had been rife with speculation concerning growth prospects, China and central bank action over Q1.

“The first few weeks of the year in particular saw a historically weak equities market,” he said.

VER, which saw its listed equity portfolio fall by 4.2% over the quarter, said this was down to share prices declining in late 2015 and continuing to “plummet” until halfway through February.

“Even though the markets recovered quickly,” Viherkenttä added, “the return on equities remained in the red.”

However, Viherkenttä signalled improved equity performance during the second quarter, saying the improved returns witnessed in mid-February had continued into the current quarter.

The Q1 declines in listed equity were not mirrored by the investor’s holdings in private and unlisted equity, which it said achieved 2.7% and 3.8% returns, respectively, over the course of the quarter.

“Fixed income instruments proved a bright spot, with a 2% return despite the extremely low interest rates at the beginning of the year,” the managing director added.

The contrasting returns across asset sub-classes was also seen within fixed income, where liquid fixed income achieved a return of 1.9%, whereas private credit produced a loss of 0.1%.

A similar loss was seen by VER’s real estate fund holdings, while infrastructure achieved a return of 2.6%,

But the fund credited the infrastructure return to a single successful sale of a portfolio company during the quarter.

The best performance across the portfolio was achieved by its risk premia strategies, which returned 7%, while hedge fund investments, also within the alternatives portfolio, lost 2.3%.