FINLAND - Varma Mutual Pension Insurance Company has posted a return of 10.8% for the first nine months of 2009 as its investment portfolio reached €28.3bn at the end of September.
Latest figures from the earnings-related pension insurer showed the best performing asset class over the nine months was equities, as the quoted equity portfolio returned 45.5% over the period, compared to a return of -39.1% for the year ending December 2008.
The value of the pension fund increased from €24.59bn at the end of last year to €28.3bn by the end of September 2009, helped by the performance of hedge funds which recorded a nine-month return of 17.2%, while the fixed income asset class achieved 6.8% overall with bonds returning 9%.
Matti Vuoria, chief executive of Varma, said the fund's investment income had "improved significantly, regardless of the difficulties in the real economy" and added: "Returns are at a near-record level despite our prudent risk policy especially towards the beginning of the year."
The results showed the allocation of the fund's assets, by market value, comprised 51% in fixed income, 23% in equities, 14% in real estate and 12% in other investments.
That said, the allocation of the fund has changed significantly over the nine months from a risk distribution basis. In December 2008, the fund had 61% in fixed income, 10% in equities, 15% in property and 14% in alternatives, but by the end of September the proportion in fixed income had reduced to 44%, while equities increased to 28%, and property and alternatives remained steady at 14% each.
Varma said "the risk level of investments was increased as the investment markets normalised following the first part of the year", a move which "can be observed most clearly in the weight of quoted equities", which equalled 23% at the end of September but just 4% in December 2008.
The solvency position of the fund have also improved by €1.59bn in the nine months, while the solvency margin - the risk buffer for investment operations - reached €5.29bn. This meant the solvency margin was 23% of technical provisions and 2.6 times the solvency limit, which Varma said is a "sustainable level".
That said, Varma emphasised it must continue to acknowledge the importance of cautiousness, a high solvency level and risk management for investments in the challenging conditions, following an increase in pension applications - up 13% from the same period in 2008.
Vuoria added: "From the perspective of an earnings-related pension company, the challenge for funding is not presented by investment income but rather the development of the Finnish total payroll. Although the economic situation seems to be stabilising, returning to normal will be a slow process."
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