FINLAND - Kuntien Eläkevakuutus (Keva), the Finnish Local Government Pensions Institution, has reported a negative return of -7.5% on investments for the first half of 2008, as assets fell to €22.9bn.
Markku Kauppinen, managing director of Keva, said the poor returns were a result of heavy stock market falls, but claimed the investments managed to perform above the benchmark.
Kauppinen said the average return has been 9% over the last five years , with a real rate of return of 7.7% a year, and in the first half of 2007 Keva reported a return of 5.4%.
"Relative to the municipalities' pension benchmark index, which describes a similar overall market allocation, the return was a good one. This was because of, among other things, the relative underweight position of equity investments, as well as from successful currency hedges", said Timo Viherkenttä, vice president of Keva.
The interim figures showed the value of premiums increased by 6% from €1.8bn at the end of June 2007 to €1.9bn in 2008, however this was offset by €1.4bn in pension benefit payments, a loss of €1.8bn from investments and £33m in costs, and total earnings of -€1.35bn, according to the fund.
The number of people insured by the local government scheme increased by 8,000 to 493,000 over the year to June, equivalent to a 2% increase, however the poor investment returns saw the total value of the asset fall 3% from €23.6bn to €22.9bn.
Figures showed the fund's investments in shares returned -15.4%, while interest rate movements yielded -0.3% in fixed income and hedge fund investments returned -0.2%,.
In contrast, real estate investment returns were 3.1%, while venture capital investments produced 2.3%, and commodities delivered a 33.3% return.
The current asset allocation of the fund is 46% in equities, 40% in fixed income, 9% in real estate, and 4% in venture capital, while the remaining 1% is split equally between hedge funds and commodities.
Keva is responsible for providing and financing employment pensions for local government officeholders and employees, and covers all Finnish cities, other municipalities and joint municipal boards, with membership reaching 960 organisations at the beginning of 2008.
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