Finland’s LocalTapiola has seen strong equity markets offset a collapse in its fixed income portfolio, as the latter asset class saw returns fall by more than 7 percentage points year on year.
The pension provider, which officially merged with rival Pension Fennia at the beginning of the year to create the €18bn Elo Mutual Pension Insurance, said its final annual results saw it return 5.4% over the course of 2013.
Hanna Hiidenpalo, former CIO of LocalTapiola, said the 14.1% return from equities, down by just over 2 percentage points over 2012, were “particularly strong” and outperformed any of the mutual’s other holdings.
“The returns were supported by the economic recovery taking place especially in the US, as well as the gradual return of investors’ confidence toward the euro-zone,” said Hiidenpalo, who is now CIO of Elo.
However, she noted that the economic recovery meant interests rates were gradually normalising, citing the change as one of the reasons Tapiola’s fixed income holdings only returned 0.2%, down from 7.4% the year previous.
Despite the best performing fixed income portfolio – corporate bonds – only returning 2.6%, the mutual was able to offset the low return with nearly 10% growth from its private equity holdings, itself down from nearly 31% returns in 2012.
Tapiola also said it increased its alternatives portfolio over the course of the year, with its holdings returning 5.5%.
The mutual also cited its recent acquisition of a 7.5% stake in the Finnish electricity distribution network owned by Fortum as proof of its role as a “domestic player in nationally important acquisitions”.
The €2.55bn deal also saw Finnish local authority pension provider Keva buy a 12.5% stake, with the remaining 80% split evenly between Ontario Municipal Employees Retirement System-owned Borealis Infrastructure and First State Investments.
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