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Private equity, real estate boost Q2 returns at Finland’s Ilmarinen

Finland’s Ilmarinen has closed out the first half of the year with investment losses, albeit with returns from the three months to June mitigating losses of 1.4% from the first quarter.

Ending June with €35.7bn in assets, the pensions mutual said its holdings returned 0.8% over the second quarter, resulting in first-half results of -0.6%.

While its equity portfolio overall generated losses of 3.6%, owing to the 5.8% loss on its listed equity holdings, Ilmarinen’s private equity portfolio produced a stronger performance, returning 5.5%.

Mikko Mursula, the mutual’s CIO, noted equity markets had continued to be volatile throughout the first six months of the year.

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“Regional yield differences between the stock markets were unusually large,” he added. “The stock indices of the United States and emerging economies ended up in clearly positive territory.

“Meanwhile, the European market, weighed down by growth and Brexit-related concerns, closed H1 clearly in the red.”

Mursula said he was convinced equity market volatility would continue to the end of the year, due to continued geopolitical uncertainty and the “rough estimates and guesses” as to the impact of the UK’s decision to leave the European Union.

“Both phenomena increase the markets’ uneasiness and are certainly not going to raise any hopes of a recovery in economic growth,” he said.

However, away from equity markets, Ilmarinen’s sizeable fixed income portfolio – accounting for nearly 45% of assets – returned 0.3%, within which loans returned 1.9%, and bonds issued by public corporations 2.7%.

Real estate, 11.3% of assets, returned 1.7%, while the mutual’s portfolio of ‘other’ investments – including hedge fund holdings and commodities – returned 10.6%.

Despite the lower overall returns for the first six months of 2016, Ilmarinen still reported an average return of 4.3% over the course of the last decade, translating to a 2.6% real return averaged over the last 10 years. 

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