Finland’s largest occupational pensions funds – Keva, Varma, Ilmarinen – have reported returns of over 7% for the nine months of this year, citing strong equity markets in the period, while smaller fund Elo posted a 5.2% return.
In financial reports for January to September released today and yesterday, the biggest pension fund, Keva, posted a 7.2% return, while the second and third largest pension funds, Varma and Ilmarinen, announced returns for the period of 7.7% and 7.4%, respectively.
Keva, which manages public-sector pensions, said its total assets have increased to €69.7bn by the end of September, while Varma and Ilmarinen – the largest two pension insurance companies on the private sector side of Finland’s earnings-related pension system – reported total assets of €63.2bn and €62.9bn, respectively.
Elo meanwhile – which also provides private-sector occupational pensions – said the market value of its investments had risen to € 31.3bn.
Keva’s chief investment officer Ari Huotari said 2024 so far had continued to favour higher-risk investments.
Markets had been concerned about central bank actions and general economic development, he said, but the overall tone had remained positive.
“Now it will be interesting to see what path and style of communication the central banks choose over the following months,” Huotari commented, adding: “The global economic development outlook poses challenges for the actions of the central banks.”
At Ilmarinen, CIO Mikko Mursula said the listed stock market had been the main driver of the pension insurance company’s positive return.
“Investments in US equities performed particularly well,” he said, adding that the fall in interest rates that started towards the end of the summer had improved the return on the fixed-income portfolio in the third quarter.
Between January and September, Ilmarinen’s return on equity investments was 11.9%, and 4.6% on fixed-income investments.
For Varma, equity investments were also the strongest-performing asset class in the period, returning 11.2%, while Varma’s fixed-income return came in at 4.7%.
Markus Aho, Varma’s CIO, said: “Geopolitical risks are especially high, but the markets have become desensitised and are not reacting very strongly to the conflicts and attacks.”
“There has, however, been some restlessness on the markets that has caused an increase in share price fluctuations,” he said.
Keva produced a 12.1% return on listed equities and 4.3% on fixed income, while Elo reported an 8.0% on equities overall, with 10.5% for listed equities alone. Elo’s fixed-income investments generated a return of 1.5%, the Espoo-based mutual pensions insurance company said.
Elo said the artificial intelligence (AI) theme had been the most significant driver of the equity market in the first three quarters of the year, with returns having been concentrated on a narrow group of companies that used AI, and large technology companies.
Jouko Pölönen, Ilmarinen’s president and CEO, remarked about the pension reform currently being negotiated by key labour market organisations in Finland, in accordance with the government’s programme, which is aimed at changing earnings-related pension legislation to ensure financial sustainability and the benefit level.
“The record low birth rate highlights the importance of return on investment for financial sustainability. The solvency framework should therefore be reformed to allow for better long-term returns,” Pölönen said.
Ilmarinen cited the latest Mercer CFA Institute Global Pension Index, which ranks pension systems around the world, and said Finland’s pension system – in seventh place overall in the 2024 line-up – was still the most reliable and transparent.
“The challenge in Finland is the financial stability of the pension system, where the score dropped significantly compared to last year,” the pensions insurer said.
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