Finland’s biggest pension fund, Keva, posted a 12.0% investment return for the first nine months of this year, with its large private equity holdings – amounting to almost of 15% of the €64.8bn portfolio – producing a 34.6% gain in the period.
The overall January-to-September return generated by the monopolistic public sector provider is higher than most of its main peers in the private sector – the four pension insurance companies Ilmarinen, Varma, Elo and Veritas – but just below Varma’s 13.5% gain.
In its recently-published third quarter report, Keva said: “Thanks to unprecedently large stimulus measures from banks and governments, the capital markets have continued to strengthen exceptionally quickly and strongly following the collapse during the coronavirus pandemic.”
Inflation was picking up, it commented, and said that as uncertainty increased in China and elsewhere, there was a growing risk and likelihood of a market correction.
Ari Huotari, chief investment officer at Keva, said there were many concerns in the air, according to the report, despite support from central banks and “basic positive market psychology” supporting the capital markets so far this year.
“The clock is ticking, which means we’re heading towards a return to everyday life on the market. How dramatic the correction movement will be and when it will hit has yet to be card,” he warned.
Ilmarinen, Varma, Elo and Veritas – the main providers of the private sector side of Finland’s earnings-related pension – recently reported investment returns of between 8.3% and 13.5% for January to September, and increases in their solvency ratios between June and September – apart from Veritas which reported a slight dip in the ratio.
On their private equity investments, Varma generated a nine-month return of 39.9%; Ilmarinen produced 34.6%; Elo returned 30.7% and Veritas registered a 24% gain.
Keva said listed equities, which carried a 39% weighting in its portfolio at the end of September, generated a return of 15.8%, while hedge funds produced 14.6% with a 6.4% weighting, and real estate – which has a 5.8% weighting – returned 3.8%, according to the interim report.
The local authority pension provider also said its fixed income portfolio, which has a 33.7% weighting, returned just 1.7%.
Keva said overall, its five-year return stood at 6.2%, and that over 10 years, the return had been 6.8%.