​Icelandic pension funds see “major turnaround” with 11% 2019 return

Iceland’s pension funds returned 11% on average last year, according to an early estimate from the country’s pensions industry group, making a strong comeback from the previous year’s slim profits.

The Icelandic Pension Funds Association (Landssamtök lífeyrissjóða) said it estimated the real return on pension savings for Icelanders to be well over 11% on average for 2019, based on the weighted average return on the total portfolio of the funds.

The association said: “This is a major turnaround from 2018 when the net real yield was 1.95% on average and much lower than 2017 when the comparable figure was 5.38%.”

The lobby group sourced this returns data for the two previous years to the Icelandic FSA. It also noted that according to the regulator, in 2018 Iceland had been only one of five countries internationally to have shown positive annual pension returns.

Since several Icelandic pension funds are still working on their annual results, the association said no final 2019 return figures were yet available.

“However, it is clear that the overall performance was very good, in both home and overseas markets,” it said.

Foreign equities were the strongest performing asset class, the group said, adding that domestic bonds had also yielded very good returns during the year.

“The main driving forces there were falling real interest rates and a falling inflation premium, which contributed to rising bond value,” it said.

Total Icelandic pension fund assets now stood at more than ISK4.9trn (€36bn), amounting to more than 160% of GDP, the association said.

Earlier this month, Icelandic pension funds Frjálsi and Almenni announced they had produced high returns of 13.7% and 14.5%, respectively, in 2019 on the strongest performing investment options they offered to scheme members.

Meanwhile, the country’s fourth largest pension fund, Birta, has reported its mixed portfolio option (Blönduð leið) – which contains a high proportion of foreign equities – ended 2019 with a 14.9% real return, after bounding back from a 1.2% loss in 2018.