Finland’s State Pension Fund (VER) made a return on investments of 1.5% in the first three months of this year, down from the 3% it generated in the same period a year ago.

Quoted equities returned just 1.4% in the period compared with the 7.4% they produced in the first quarter of 2013, but fixed income investments returned 1.5%, up from the year-earlier return of 0.2%, the pension fund said in its interim report.

Timo Löyttyniemi, chief executive at the fund, said: “The development of returns at the beginning of the year was reasonable despite the strong fluctuations in the markets.”

He said the markets had shown no clear direction, even though the Ukrainian crisis had added colour.

Stock markets were weaker than before because of mild disappointments in economic development, particularly in the US, he said.

Asset allocation in VER’s investment portfolio tipped slightly towards private equity and away from fixed income during the period, with the former rising to 3% from 2% and the latter falling to 51% from 52%.

Quoted equities made up an unchanged 40% proportion of the portfolio at the end of March.

The State Pension Fund’s market value of investments rose slightly to €16.5bn as of the end of March from €16.3bn at the end of December. 

Meanwhile, pension insurer Varma reported a 2% return on investments for the first three months of the year, and said it was keeping its equity weighting stable since there were no better alternatives.

All investment classes made a profit in the quarter, according to the interim report.

The overall investment return in the period undercuts the 3.4% return achieved in the same period last year.

Risto Murto, president and chief executive of the company, said: “The recovery from the financial crisis has been strong.”

Assets under management increased in value to €38.7bn at the end of March from €36.2bn at the same point in 2013.

Solvency capital increased to €9.6bn, or 32.9% of technical provisions, versus €8.4bn and 30.1% a year before.

Fixed income investments performed unexpectedly well, it said, returning 1.4% in the quarter compared with 0.6% in the same period in 2013. 

Despite being affected by the crisis in Ukraine, worries about the economic growth in China and expectations the US Fed would trim debt stimulus measures, share prices increased between January and June, Varma said.

Its equity investments generated a 2.6% return, down from 7.6% in the first quarter of 2013, while property returned 2.1%, up from 1.3%.

Investment allocations were broadly unchanged in the three-month period, with equities remaining the largest asset class in the portfolio with a weight of 38%.

Chief investment officer Reima Rytsölä said: “Hardly a single investor feels entirely confident about opting for equity overweight. Right now, however, it’s difficult to find a better alternative to equities and, in that respect, the situation has not changed since the turn of the year.”

In other results from Finnish pension funds, Veritas reported a 1.8% return for the first quarter but warned it had muted expectations for profits over the rest of the year.

Equities returned 2.6% and fixed income investments 1.8%, the pension insurer said in its interim report.

The overall investment return was down from the 2.4% posted in the first quarter of 2013.

Niina Bergring, investment director, said: “The first quarter was strong, and we are pleased with the performance. However, the expected return for the rest of the year remains moderate.”

Fixed income returns were helped by positive development in corporate bonds and falling interest rates, she said.

Valuations in equity markets were now somewhat high, she added.

She said Veritas had lowered the level of risk in its portfolio slightly and was following developments in China particularly closely.

Solvency increased to 28.6% of technical provisions by the end of the quarter, up from 27.6% at the end of December 2013.

Assets under management rose to €2.52bn at the end of March from €2.45bn at the end of December.