Finland’s biggest two pension insurance companies have both reported positive investment returns for the first quarter, but Ilmarinen outpaced Varma, and ended March having regained its position as the larger of the two.

In Q1 reports published by both Helsinki-based pensions institutions today, Ilmarinen revealed a 2.2% return and Varma reported a 1.0% gain.

The value of Varma’s investments grew to €56.6bn at the end of March, below the €57.5bn achieved by Ilmarinen. Both firms – the mainstays of Finland’s private-sector earnings-related pension system – had begun January with €56.2bn of assets.

Varma’s chief investment officer Markus Aho said: ”The first quarter was characterised by successfully overcoming the sudden risk factors, such as the problems in the banking sector, for the foreseeable future.”

Authorities in the US and Switzerland had acted quickly to stem deposit runs and secure the liquidity of banks, he said.

“Varma did not have any major direct investments in the distressed banks, and we were thus not exposed to risks beyond normal market reactions,” Aho added.

At Ilmarinen, Jouko Pölönen, president and chief executive officer, said: “Ilmarinen’s return on investments in January–March was 2.2% thanks to the positive return on equities and shares in the early part of the year.”

Details in the three-month reports show that although Ilmarinen has a slightly lower weighting to equities than Varma, at 47% compared to Varma’s 49%, it made a 2.9% return on the asset class – more than Varma’s 2.0%

Drilling down further, Ilmarinen made a 4.3% gain on listed equities while this asset class produced a 2.9% return for Varma.

Both investors have a 31% allocation to listed equities.

For fixed income investments, Ilmarinen reported a 2.3% return from January to March, and Varma reported a 1.2% gain. Ilmarinen has a higher allocation to fixed income than Varma, at 30% compared to its peer’s 25% weighting.

Also, Ilmarinen made a narrowly positive return on its real estate assets of 0.8% in the quarter, whereas Varma reported a -0.8% return for its property portfolio. Ilmarinen has a higher weighting to real estate at 11.9% compared to Varma’s 10%.

Varma has long had a higher exposure to hedge funds than Ilmarinen at 15% of the portfolio, compared to Ilmarinen’s 8.4%. In the first quarter, Varma’s hedge funds made a loss of 1.1%, and Ilmarinen made a narrow hedge fund gain of 0.5%.

Looking ahead, Aho said: “The markets are expecting interest rates to fall during the rest of the year, and inflation peaks are also probably behind us.”

But it would take time for inflation to stabilise at the target level, he said, adding that there were also question marks over how starkly the economy would weaken.

Yesterday, Finland’s other two pension insurance companies, Elo and Veritas, each reported a 1.6% return for the first quarter.

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