Pension funds managed by Norway’s local authorities returned around 6% last year, with real estate and bonds both performing well, according to early figures gathered by the Norwegian Pension Funds’ Association.
The Oslo-based lobby group, Pensjonskasseforeningen, announced on its website: “Municipal pension funds have managed well in 2020 with a 6% return.”
Espen Klow, secretary general of the lobby group, said: “The experience of 2020 shows that it is important to be present in the markets and follow the strategy even in the worst turbulence.”
To be able to do this, the pension funds were dependent on having a significant level of buffer capital, he said, in comments in an article on news service Kommunal Rapport, which the association linked to from its own brief announcement.
“The pension funds have used the long upswing in the stock markets from 2009 to build buffers. So they were well equipped to withstand the unrest in 2020,” Klow said.
Equity markets had rebounded later on last year, he noted, on the back of successes with coronavirus vaccines, following March’s fall on stock markets around the world of more than 30%.
He said real estate returns had also been good for the association’s municipal pension fund members last year, despite the uncertainty surrounding the future of the office market.
On top of this, Klow said bonds had yielded good returns for the funds, with a further fall in interest rates from an already low level.
The article cited figures from the Norwegian FSA, reporting that municipal pension funds had returned an average of 5.4% annually over the 10 years between 2010 and 2019.
“With a guaranteed interest rate of 2.5%, the pension funds have been able to deliver significant funds back to the municipalities,” Klow said.
He said the pension funds’ risk diversification was good, with some 30% being invested in shares, 10% in real estate and 60% in bonds.
Municipal pension funds are due to report their final 2020 results in early April.
This investment result from municipal pension funds belonging to the association – such as Asker kommunale pensjonskasse, Oslo Pensjonsforsikring and Trondheim kommunale pensjonskasse – is likely to be compared to the forthcoming 2020 returns of KLP, which manages pensions for the lion’s share of the country’s local councils.
KLP is due to publish its annual financial results next Wednesday.