FINLAND - Ilmarinen pension insurance company has reported a 13.4% return between January and the end of September, driven primarily by equity returns of 22.9%.

Figures from the first nine months of 2009 showed the total market value of the fund increased by almost €5bn from €20.9bn at the end of 2008 to €25.1bn, which includes a jump of more than €2bn in the third quarter, up from €22.9bn at the end of June. (See earlier IPE article: Ilmarinen investments jump €2bn on 6.6% return)

Ilmarinen has an allocation by market value of 53.2% in fixed income, 32.7% in equities, 10.1% in real estate and 4.1% in other investments such as hedge funds but it revealed the best performance over the nine months came from equities.

Listed equities and shares actually posted a return of 29.1%, however private equity offset this gain by losing 23.7% on investments in that period.

In contrast, fixed income achieved a 11.6% return, driven primarily by the 16.1% return on the bonds portfolio, while alternative investments produced 6%.

The only negative result came from the real estate portfolio, because while direct real estate yielded 4.2%, investments in real estate funds and joint investments returned -22.6% over the period.

Despite these small negative performances, Ilmarinen claimed the strong recovery in the third quarter means that almost two-thirds of the losses recorded in 2008 have now been recovered.

Timo Ritakallio, deputy chief executive, head of investments at Ilmarinen, said: "The moral of the story is that equity investments pay in the long run. We kept our nerve and held on to stocks even when the market lost faith in them."

The firm said its solvency capital had improved to 22.8% of technical provisions by the end of September - equivalent to three times the solvency limit - against a figure of just 14% of technical provisions at the end of 2008.

Elsewhere, Tapiola Pension has reported an investment return of 10.5% over the nine-month period, as the market value of its scheme assets increased from €7.3bn at the end of 2008 to €8.24bn by 30 September 2009.

Satu Huber, managing director of Tapiola Pension, claimed: "The record high return for the past nine months has already made up for the loss incurred in the challenging investment year 2008. The investment income for the first nine months of 2009 rose to €788.5m." This is compared to a loss of €450.5m in the same period in 2008.

The positive performance was driven mainly by a 29.8% return on the equity portfolio, although fixed income and real estate both posted positive results of 6.9% and 1.1% respectively.

Tapiola's asset allocation at the end of September comprised 62.8% in fixed income, 25.6% in equities and 11.6% in real estate, and Hanna Hiidenpalo, investment director at Tapiola Pension, said: "Our investment strategy had the correct weightings. Allocation to credit and equities was increased during the period"

This has helped improve the pension company's solvency ratio, which moved from 16.2% of technical provisions in December 2008 to 21.9% nine months later - equivalent to 3.4 times the solvency limit.

However, Hiidenpalo warned: "Even though markets have yielded excellent returns in the first nine months of the year, there is much uncertainty associated with the development of the markets."

She pointed out that interest rates have reached an extremely low level, which has increased the allocation towards riskier investments. She therefore claimed: "A more permanent positive development in the market will require broad based recovery in the real economy."

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