Do you think you’ll ever enjoy retirement? You can believe so, because investment returns are improving

There has once again been a competition in the return comparison of four large pension investors, and this time the differences remained small in percentage terms. Each of them achieved nine-month returns of seven percent or more.

About occupational pension insurers Ilmarinen achieved an investment return of 7.4 percent in January–September. Rival Varma reached an even better investment return of 7.7 percent in nine months.

“The investment environment has been favorable. The stock market was particularly positive,” says CEO Ilmarinen Jouko Pölönen on Friday.

“In the third quarter of the year, all asset types produced positive returns,” Varma mentioned separately in his announcement.

Last year, between January and September, Varma’s investments yielded only 2.8 percent. In the same period, Ilmarinen’s investment returns were 3.3 percent, so the duo’s returns have improved strongly.

Portfolio values ​​increased by billions

Ilmarinen says that the return of its portfolio at the beginning of the year was 4.4 billion euros. Varma accumulated a profit of 4.6 billion euros in January–September, and the value of its investments rose to 63.2 billion euros at the end of September.

Ilmarinen Pölönen points out that in the future the importance of investment returns will increase due to payment pressures. Pension expenses are greater than pension companies’ payment income.

“When you get a good return on pension assets, you can use it to pay the difference between contribution income and pension expenses. The difference in cash flow is covered by investment returns,” summarizes Pölönen.

Roughly 800 billion euros have been accumulated from the so-called pension promise. At the end of September, the total amount of the investment assets of the entire occupational pension system was approximately EUR 270 billion.

Keva lost to Varma and Ilmarinen

In charge of public sector pensions Kevan the return on investments in January–September was 7.2 percent, or 4.7 billion euros. Employment pension company Elon the nine-month investment return was 7.0 percent, or 2.1 billion euros.

“Our investments paid off well,” commented Elo’s CEO Carl Petterson in the bulletin.

“The fundamental mood has remained positive”, described the market situation Keva’s investment manager Ari Huotari.

Because the weight of public authority is so large in the Finnish economy, Keva is also Finland’s largest occupational pension provider. It is known for financing pensions in the municipal sector and welfare areas.

The high return on share investments explains

Each of the four occupational pension insurers is united by a strong return from listed shares. Income from interest and real estate investments remained lower, even though income from interest investments improved in the third quarter of the year.

The development of the stock market has been so strong that it is primarily reflected in the investment returns of occupational pension insurers. Behind the development is especially the favorable development of international stock markets.

The weighting of North American stocks is typically high in the portfolios of pension companies. Investments have been moved from Europe to the United States.

Above all, this is why equity returns are good across the board. For example, shares quoted from Elo’s investments returned 14.1 percent in the beginning of the year. In the case of Keva, the quoted shares yielded 12.1 percent.

In its press release, Elo says that in the USA, the companies offering public utility services and in the euro area companies in the real estate sector produced the best returns.

Varma, on the other hand, reports that its equity investments have returned 11.2 percent in January–September. In the case of Ilmarinen, the return on equity investments was 11.9 percent, but its listed shares yielded as much as 15.1 percent.

Income from fixed income investments strengthened

The clear slowdown in inflation and the drop in interest rates have strengthened the returns on fixed-income investments, Varma reports.

“The past year has been good for pension investors,” commented Varma’s CEO Risto Murto on Friday.

Changes in the expectations of a decrease in key interest rates have weighed on market interest rates. Thus, the returns on government bond investments became positive in the third quarter.

According to Varma, income from fixed income investments rose strongly in the third quarter. In January–September, the return on its fixed income investments was 4.7 percent.