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Nordic roundup: Varma poised to remain Finland’s largest pension fund

Finnish pensions insurance company Varma would still be the country’s biggest pension fund if the upcoming merger of its rival Ilmarinen with Etera were complete, according to figures Varma released for the first half of the year.

According to results for January to June 2017, the market value of Varma’s investment portfolio reached a new record of €45.0bn at the end of June, just topping the combination of total assets reported for the same period recently by Ilmarinen and Etera, which were €38.5bn and €5.9bn respectively.

Ilmarinen, Finland’s second largest private sector earnings-related pension provider, and smaller pensions insurer Etera announced in late June that their boards had approved a merger which is set to complete in January.

Varma’s chief executive Risto Murto said domestic economic growth had been brisk in the reporting period.

“As a pension investor, we have seen the post-financial-crisis recovery in the markets for a long time now, but so far it has mainly only affected the investment markets,” he said.

“The upswing has finally also reached Finland’s economy,” Murto said.

Varma reported that its investments returned 4.7% in the first half, compared with a 0.3% loss in the same period last year.

Keva cashflows turn negative 

Meanwhile, equities were the strongest-performing assets in the portfolio of Finnish local government pension fund Keva in the first half of this year, but the fund’s CIO warned that the long bull market might have negative consequences.

The overall investment return was 3.7% in the January-to-June period — up from 0.9% in the same period last year, according to unaudited interim figures from the pension fund.

Listed equities and equity funds produced a 7.4% return, fixed income investments returned 1.1% and real estate generated 2.6%, Keva said.

Ari Huotari, Keva’s CIO said: “The first half of 2017 was like a continuation of last year, with equity markets continuing to rise to reach all-time highs in many markets.

“However, it needs to be pointed out that the prolonged rise of many asset categories, especially the riskier ones, has also increased concern as to future development,” he said.

Keva chief executive Timo Kietäväinen described this year as a remarkable one for the pension fund, as it was the first time that the amount of pensions paid out had exceeded the employer and employee contributions paid in.

In rounded figures, the pension fund reported that contribution income during the first half had come to €2.5bn while €2.5bn had been paid out in the same period in pensions.

Industriens Pension returns 3.7%

Elsewhere in the Nordic region, Danish labour-market pension fund Industriens Pension reported its investments had yielded a 3.7% return overall, driven in particular by listed Danish and foreign equities. 

Karsten Kjellerup Kjelsen, CIO at the pension fund, said: “The financial markets were marked by some nice economic growth globally, and central banks continued their easy monetary policy.

“This created good demand for shares and similar risk assets, among which emerging markets and Danish equities did particularly well,” he said.

Danish listed equities were the strongest performing asset class for Industriens Pension, making up just over a tenth of its portfolio and returning 6.8% before tax in the period.

Foreign listed shares, which account for nearly 30% of the portfolio, produced 7.8%.

However, gilt-edged bonds, which make up 27% of assets, returned just 0.2% in the six-month period.

Industriens Pension’s total investments grew to DKK157bn (€21bn) at the end of June from DKK150bn at the end of 2016.

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