Varma’s first-half returns reveal that the Finnish mutual pensions insurance company was beaten by its cross-town rival Ilmarinen in the period, producing weaker gains on equities and a significant loss on its real estate assets.

Helsinki-based Varma, one of the main providers in Finland’s private sector earnings-related pension system, reported a 2.6% investment return for January to June, bringing total assets to €57.2bn.

Earlier this week, Ilmarinen turned in a 3.7% interim return, with assets under management growing to €58.2bn.

Risto Murto, Varma’s president and chief executive officer, said the first half of the year had been divided for investments, with exceptionally large differences within the investment portfolio.

“Of Varma’s investments, US equities performed well, whereas Finnish equities experienced the weakest performance among the industrialised countries. It looks as though Finland is sliding into an industrial recession,” he said.

For Varma, equities generated a 4.6% return over the six months, fixed income investments returned 1.8%, real estate ended with a 3.3% loss and hedge funds produced a 2.4% gain, according to its interim report.

By comparison, the returns for the same asset classes for Ilmarinen in the first half were 5.7%, 3.7%, 0.1% and a loss of -0.1%, respectively.

Markus Aho, Varma’s chief investment officer, said sentiment in investment markets had been positive in general in the second quarter, with enthusiasm around artificial intelligence having sparked some optimism about the future and raising the valuation of technology companies.

“However, some asset classes, such as real estate, yielded negative returns. These asset classes are still in the process of adapting to the new investment environment created by tight monetary policy,” Aho said.

Regarding the loss on property, Varma said that based on an independent external estimate, it had recorded an impairment of €173m in its directly-owned real estate portfolio. Overall, Varma’s real estate investments were valued at €5.62bn at the end of June, including €3.04bn of direct real estate.

The pension provider said the inflation hedge provided by real estate investments had contributed to offsetting the change in value, as rents had generally followed the development of inflation, increasing net rental income despite the rise in maintenance costs.

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Rachel is IPE's Nordic correspondent. She has long been a freelance writer, and over the years, has written for The Telegraph, The Independent, The Observer, AMWatch and elsewhere. In 2001, Rachel's personal finance book Kickstart Your Money was published by John Wiley & Sons.View full Profile

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