Press release 22nd October 2014

Published 2014-10-22 at 9:00

Press release 22 October 2014

6.5 per cent return on investment for the State Pension Fund

The return on investments of the State Pension Fund (VER) for the period 1 January to 30 September 2014 was 6.5 per cent. VER’s ten-year average annual return is 5.8 per cent.

The market value of VER’s investments was 17.4 billion euros at the end of September (16.3 billion euros on 31 December 2013). VER investments comprised fixed-income investments of 51.7 (51.6) per cent, equities of 39.6 (39.9) per cent, and other investments of 8.7 (8.5) per cent.

The return on fixed-income investments was 4.4 per cent, while the return of equity investments was 9.8 per cent. Other investments achieved a 5.0 per cent return.

The development of the global economy has continued mixed. The U.S. economic growth has progressed as expected. But in Europe, the economic growth and inflation have remained low, with no relief in sight as of yet. VER’s return on investments, however, was good in all asset classes.   In the future, the general low interest rates will present challenges for the returns on fixed-income investments, states Managing Director Timo Löyttyniemi.

The estimated pension contribution for the period from January to September 2014 is 1,295 million euros. The accumulation is 49 million euros higher than during the same period last year.

A total of 1,305 million euros of VER funds were transferred to the State budget by the end of September, which was an increase of 45 million from the previous year.

Market situation

The growth of the global economy was already well on its way towards normal after a weak start of the year, until it began to decelerate once again during the third quarter. In Europe, the Ukrainian crisis and the related economic sanctions clearly decelerated growth of the economic powerhouse Germany. In China, the change from an investment-driven economic model to a consumption-based one has also decelerated economic growth. On the other hand, in the United States and UK, the growth has continued strongly after a slow start of the year. In the near future, these countries’ central banks are expected to begin to gradually tighten their monetary policy. Meanwhile the European Central Bank and the Bank of Japan will continue to maintain their reflationary monetary policy.

Fixed-income investments

The return on fixed-income investments was 4.4 per cent, while the corresponding figure for year 2013 was -1.6 per cent.

The return on fixed-income investments during the period was good, considering the low starting point at the beginning of the year. Even so, interest rates continued to decline strongly and inflation expectations remained moderate. At the same time, the increased geopolitical risks supported the fixed-income market, while credit market returned the best. Emerging market debt and the peripheral debts produced the best absolute returns.

Quoted equity investments

The return on equity investments was 9.8 per cent, while the corresponding figure for year 2013 was 18.2 per cent.

The return on equity investments remained positive during the third quarter. The best returns on VER’s equity investments during the year, came from the United States (partly due to the strengthening dollar) and from emerging markets. Willingness to take risks declined slightly among investors towards the end of the quarter, though it started out quite high at the beginning. The start of the last quarter has been somewhat uncertain.

Other investments

The return on other investments was 5.0 per cent, while the corresponding figure for year 2013 was 5.7 per cent.

In other investments, the positive momentum has continued since the summer. Compared to the end of June, the returns from all asset classes improved. The best returns came from capital investments, which have been supported by the positive development of the stock market. Investors’ increased interest towards real estate investments supports the upward trend of returns from the real estate portfolio.

For more information, please contact:

VER Managing Director Timo Löyttyniemi tel: +358 (0)9 2515 7010 or +358 (0)50 336 2094

The State Pension Fund (VER) is an off-budget state fund, established in 1990. Finnish state uses VER to prepare for the financing of future pension liabilities and the balancing of pension costs. VER is an investment organisation that manages and invests assets allocated to it. At the end of September 2014, the market value of VER's investment portfolio was 17.4 billion euros.   

  30.9.2014 30.9.2013 31.12.2013
Investments, MEUR (market value) 17 069 15 429 16 335
Fixed-income investments 8 848 8 069 8 431
Quoted equity investments 6 747 6 053 6 511
Other investments 1 474 1 308 1 392
The breakdown of the invesmtent portfolio % *)      
Fixed-income investments 51,8 % 52,3 % 51,6 %
Quoted equity investments 39,5 % 39,2 % 39,9 %
Other investments 8,6 % 8,5 % 8,5 %
*) The impact of derivatives in the portfolio is -0,2 %      
  1.1.-30.9.2014 1.1.-30.9.2013 1.1.-31.12.2013
Return on investments, % 4,8 % 0,6 % 6,4 %
Fixed-income investments, % 3,6 % -2,0 % -1,6 %
Quoted equity investments, % 6,8 % 4,3 % 18,2 %
Other investments, % 2,8 % 1,6 % 5,7 %

 The figures presented in this release have not been audited.