Icelandic pension funds returned an average of 7.3% in the first half of the year, according to new figures from the industry association, with weightings to foreign investments remaining steady – and private pension savings increasing despite the pandemic measure to allow withdrawals.

Overall, Icelandic pensions funds saw their total assets rise to just over ISK6.15trn (€41.5bn) by the end of June, the Icelandic Pension Fund Association (Landssamtök lífeyrissjóða, LL) said in a statement on interim results from its members.

This compares to the ISK6.05trn the sector managed at the end of 2020, as reported by the Icelandic central bank.

LL said: “Foreign assets account for just over a third of all the funds’ assets, and this proportion has been fairly stable so far this year.”

Pension funds in Iceland have been rebuilding their allocations to foreign investments over the last few years since the country relinquished its post-crisis capital controls.

With foreign assets having reached a weighting of 34% for pension funds as a whole at the end of 2020, the central bank reported in April that the funds had scaled back their foreign currency purchases in the year so far.

It said that could indicate that some funds had almost met internal targets for foreign assets.

LL also said in its release on first-half figures that private pension savings held by pension funds had grown since the beginning of 2021 to account for about 10% of the funds’ total assets at the end of June.

“This type of savings has grown by 8.6% so far this year, despite the current authorisation for special disbursements of private pension savings because of COVID-19,” the lobby group said.

Lending by pension funds had continued to decline between January and June, it said, with loan repayments exceeding new lending by the funds to the tune of ISK24bn.

The bulk of those repayments – ISK32bn – related to indexed loans, it said, with only ISK8bn of non-indexed loans having been repaid.

“Recently, there has been a rapid change in household mortgages from indexed to non-indexed loans, and when looking at all lenders, about half of household mortgages are now non-indexed,” LL commented.

Total lending by pension funds to households amounted to ISK486bn at the end of June, it said, adding that this was almost a quarter of all household housing loans in Iceland.

Separately, pension fund Almenni reported that its balanced pension options returned between 4.1% and 8.3% in the first half of the year.

The pension fund said all of its investment options had produced positive returns in the period except its short-term government bond portfolio, which made a 0.1% loss.

Almenni said: “The MSCI world equity index rose by 13% in US dollars in the first six months of the year, but rose by 9.5% in Icelandic krónur as the Icelandic króna strengthened against the dollar during the period.”

The domestic stock market, meanwhile, had recovered since the end of March, it said, with the main index rising by 22% in the first half of the year.

Two companies had been listed on the main list in the first half of the year, Almenni said – fish processing firm Síldarvinnslan in May and bank Íslandsbanki in June.

Looking for IPE’s latest magazine? Read the digital edition here.