Finland’s largest pension fund suffered a 3% investment loss last year, with the market value of its assets contracting by €1.8bn during 2018.
Keva’s assets fell to €50.1bn by the end of December 2018, compared with €51.9bn a year earlier.
The fund, which manages local government pensions, said its strongest performing asset classes in 2018 were private equities, with a return of 13.5% and real estate with 7%.
CIO Ari Huotari said: “The entire investment year was marked by restlessness, nor can the market events at the end of the year be called rational.
“Whereas the markets have begun on a positive note in 2019, the underlying concerns have not in reality disappeared. I think we’ll still see quite considerable market fluctuations also during the current year.”
The pension fund’s fixed income investments ended the year with a 1.6% loss, while listed equities lost 10.4%.
Keva’s hedge funds allocation made a slim 0.3% return.
In an EU tender notice published earlier this month, Keva said it had appointed London-based Albourne Partners to provide hedge fund advisory services.
The contract is worth £850,000, and Albourne Partners was the only bidder.
The service procured would, Keva said, be used partly to conduct hedge-fund manager selection but also to monitor existing and potential future new relationships, as well as for risk management.
The pension fund had 7.6% of its portfolio – approximately €3.8bn – allocated to hedge funds at the end of 2018, according to its annual report.
In its results statement, Keva also said that its board had approved a new five-year strategy on 7 March. The plan focused on strengthening efficiency, developing customer relationships, utilising digitalisation and making preparations for changes in the earnings-related pension sector.
Pension reforms currently under discussion in Finland could challenge Keva’s monopoly on public sector provision, with a working group recommending last month that the sector be opened up to competition.
Separately, Finnish earnings-related pension fund association TELA provided the bigger picture of how investment returns had affected its members last year.
Overall, it said Finnish pension funds oversaw a total of €193.4bn at the end of 2018, with total pension assets having fallen by €6.4bn over the year. The association attributed this decline to weak performance in equity markets.
TELA analyst Kimmo Koivurinne said: “The market uncertainty in the last quarter of the year caused the valuations of listed equity investments in particular to fall sharply.”