Finland’s three mutual pension insurance companies this morning reported financial returns for 2021, with Varma beating its peer Ilmarinen and narrowing the assets under management (AUM) gap between the two, and smaller player Elo boasting a record-high 40% return on its private equity investments.

Varma closes in on Ilmarinen

Varma reported a rise in AUM to €59.0bn at the end of 2021 from €50.2bn a year before, while Ilmarinen’s AUM grew more slowly to €60.8bn from €53.3bn – a development which narrows the gap between the big two providers in the private sector side of Finland’s earnings-related pension system.

Varma said its total return for last year came to 18.5%, corresponding to €9.3bn, from last year’s figures of just 2.8% or €1.4bn, with its chief executive officer commenting that the pandemic had not sparked as broad an economic downturn as had the financial crisis over 10 years ago.

Risto Murto, CEO of Varma, said: “On the contrary, last year was marked by a classic upswing, despite the pandemic. In the US there is discussion concerning whether the economy overheated.”

Chief investment officer Reima Rytsölä said last year had been an exceptionally favourable year for investors, and that Varma’s strategic allocation had paid off, and asset classes that showed weak performance in 2020 becoming its strengths.

He said: “It goes to show that investment calls for resilience and perseverance.”

Equities performed the best last year, the firm said, generating a 32.2% return, within which private equities returned 49.6%, unlisted equites produced a 26.3% return, and listed equities 26.4%.

Hedge fund investments generated a strong return of 15.3%, Varma said, compared to last year’s loss of 1%, real estate produced a 5.9% return, and fixed income investments generated the same return as the previous year at 1.9%.

Ilmarinen: defensive position weakened returns

Finland’s largest mutual pension insurance company, Ilmarinen, reported a full-year return of 15.3% for 2021, with its CIO Mikko Mursula saying the firm saw the best return from its equities portfolio at 28%, with “exceptionally good returns from private equity investments.”

Mursula added, however, that Ilmarinen’s absolute return investments had a fairly defensive positioning, and as a result, had performed weaker in a highly positive market environment in 2021 than in the previous year.

The pension insurer said its 15.3% return compared to last year’s figure of 7.1%, and corresponded to €8.1bn, with its solvency capital rising to €16.5bn, corresponding to a solvency ratio of 136.7% – up from the 2020 figure of 130.2%.

Ilmarinen reported a 3.9% return on fixed income, up from a loss of 0.4% in 2020, while real estate returned 8.8% in 2021.

Elo boasts record-high 40% return on private equity investments

Elo reported what it said was a record-high return on its private equity investments of over 40%, as part of an overall investment return for 2021 of 14%, up from the previous year’s 3.6%, with total assets rising to €29.4bn from €25.9bn in 2020.

CIO Hanna Hiidenpalo said of the private equity return: “The returns are the result of consistent investment activity. Companies benefitted from the recovery of economies and good share price development.”

Elo’s equity investments overall returned 26.6%, up from 4.5% in 2020, with fixed-income investments generating a 10.0% return, up from 2.6%. Real estate investments returned 7.5%.

The pension provider warned that economic growth, inflation and central bank policy would have a significant impact on financial markets in the first half of 2022, with growth forecasts for the world economy for this year lower than last year, at around 4%.

Veritas, the fourth pension insurance company in the earnings-related pension system – which is a limited liability company rather than a mutual – reported its 2021 figures yesterday.

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