FINLAND - Uncertainty in global stock markets pulled down investment returns among Finland's largest pension funds during the first half of 2011. 

Several funds reported near-zero returns, with global equities generally underperforming and private equity and property outperforming.

Fund managers expect uncertainty in the stock markets to continue.

At €29bn Ilmarinen, returns for the first half stood at 0.1%.

Property - its best-performing asset class - returned 2.6%, while fixed income came second with 1.1%. Equities fell by 2.5%.

Timo Ritakallio, deputy chief executive and head of investment at Ilmarinen, said the euro-zone debt crisis and US debt problems still overshadowed his investment outlook.

"This is causing apprehension in both companies and private households," he said.

"Under the circumstances, there is the threat that global economic growth will slow down again."

At €2bn Veritas, returns were equally meagre, with the portfolio yielding a total return of 0.0%.

The fund's chief investment officer Staffan Sevón noted the strong drop in Nokia shares, as well as the several weeks of uncertainty regarding the formation of a new government after the general elections caused restlessness in the Finnish market this spring.

"As a result, domestic equities yielded -7.8%, while European equities yielded 0.7%," he said.

The Veritas equity portfolio lost 2.2% over the first half of this year. Unlisted equities yielded the best return, at 6.6%, while property returned 3.9% and fixed income 1.2%.

Sevón warned that another slump might still be in the offing.

"There is a particularly noticeable uncertainty in global markets," he said. "The structural challenges in Europe and the US are so big there is a threat of a long slowdown, as has happened in Japan."

The €14bn State Pension Fund (VER) lost 0.7% overall compared with an 11.7% return for the same period in 2010.

Equity investments fell by 3.4%, while 'other' investments returned 2.4% and fixed income 1%.

Managing director Timo Löyttyniemi said: "Emerging market bonds, to which we have increased our exposure, yielded especially sound returns."

He also said the debt crisis in Greece and a number of other EU member states had caused the greatest uncertainty in the markets.

At €33.8bn Varma - Finland's largest mutual pension insurance firm - investments returned 1.3%.

While its performance was among the best, the scheme said it was a clear drop since the 3% return over the same period last year.

The best performing asset class was private equity (7.9%). Fixed income returned 0.7, while equities lost 1.2%.

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