Varma, one of the two pension firms dominating Finland’s earnings-related pension system for the private sector, reported a 10.4% return on investments for the first half of this year, and said its equity allocation had grown to the highest weighting ever.
In its interim report this morning, the mutual pension insurance company said total assets had risen to €55.0bn by the end of June after closing 2020 at €50.2bn – which compares to the end-June level of €57.5bn recently reported by its close rival Ilmarinen.
Reima Rytsölä, Varma’s CIO, said: “The equity markets have performed very well, and Varma’s hedge fund investments have also yielded good returns.”
US equities broke records the entire first half of 2021 and continued to do so in July, he said, despite the spread of the delta variant of COVID-19.
Varma reported that it increased its proportion of equity investments by 4.7 percentage points since the end of last year, with the asset class making up 51% of the overall portfolio by the end of June, which it said was more than ever before.
Equities were the highest-returning assets for Varma in the first half, generating 18.3%, including a 25.2% gain for private equity and 16.2% return for listed equities.
Hedge funds returned 7.5% in the period – contrasting with the 7.9% loss they had resulted in in the same period last year, according to the interim report.
Real estate investments returned 1.9% and fixed income produced just 0.9%, Varma reported.
Varma’s solvency capital grew to €14.7bn at the end of June from €11.5bn on 1 January, the firm said.
Looking ahead, Rytsölä said that in the second half of the year, investors would keep an eye on whether the rise in inflation halted as expected.
“If the central banks tighten their monetary policy too quickly, economic growth would be at risk,” he said.
Varma also said in the report that the liabilities of bankrupt Finnish pension fund Viabek had been transferred to earnings-related pension companies on 30 June 2021, with about €61m of these being transferred to Varma as part of that.
It said it also contributed €23m to help cover the shortfall in Viabek’s pension assets.