Risto Murto, president and chief executive at Finnish pensions insurance company Varma, has called for a re-evaluation of euro-zone economic policy, as the insurer reported an investment return of -1.4% for the first quarter of 2016, compared with 5.3% for the same period in 2015.

Varma, whose portfolio stood at €41.1bn at 31 March, blamed the losses on market uncertainty earlier in the year, in response to concerns over the Chinese and US economies.

However, Murto also questioned the direction of economic policy within the euro-zone.

Since the financial crisis, fiscal policies have focused on balancing public deficits, with responsibility for active economic policy transferred to central banks. 

“Monetary policies are very much focused on stimulus measures, and the measures used by central banks are highly exceptional,” he said.

“Record low interest rates and quantitative easing now support the markets, and, for pension investors, this shows as negative deposit rates.”

He concluded: “While it is beneficial for at least one area of economic policy to strive for growth and inflation, nevertheless, economic policy as a whole should be re-examined within the euro-zone.

“The European Central Bank’s policy options are all but exhausted, and even now the policy entails major long-term risks.”

Meanwhile, returns from Varma’s equity portfolio – 38.3% of its total investments – were -3.1%, compared with 9.6% for Q1 2015, with listed equities returning -5% (11.7% in 2015).

Reima Rytsölä, CIO at Varma, said: “January was bleaker than ever in the equity markets, as concerns over China’s economy escalated and the US economy faced headwinds.

“The equity markets plummeted, with the Chinese stock exchanges leading the way.”

However, Varma dampened the effect by active diversification of its investment portfolio, markedly reducing the weight of equities in favour of fixed income and real estate.

Listed equities make up 78.9% of the equity portfolio, but private equity (16.3% of the portfolio) returned 2.5%, slightly less than for Q1 2015.

Unlisted equities (4.8% of equities as a whole) were the highest-performing asset class over the entire portfolio, with a 8.2% return, compared with 1.5% in 2015.

Varma said that, in addition to unlisted equities, fixed income and real estate were also unaffected by market fluctuations, returning 0.2% and 1.2%, respectively, for the quarter.

Fixed income returns were positive because of a decline in the price of corporate bonds, caused by higher pricing of credit risk in the face of a weakening global economic outlook.

As of the end of March, the average annual nominal investment return over five years was 4.4%, and, over 10, 4.3%.

Turning to the second quarter, Rytsölä was more optimistic about the economic backdrop.

“US economic growth seems to be holding, and China’s situation is no longer completely hopeless,” he said.

“The recovery of commodity and especially oil prices has helped to balance market sentiment.”

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