Press release, 21.8.2013
Published 2013-08-21 at 9:00
Press release, 21.08.2013
0.6 per cent return on investment for the State Pension Fund (VER)
The return on investment of the State Pension Fund (VER) for the period from 1 January to 30 June 2013 was 0.6 per cent, while the corresponding figure for the whole of 2012 was 11.3 per cent. VER’s ten-year average annual return is 5.7 per cent.
The market value of VER’s investments was 15.4 billion euros at the end of June (15.4 billion euros on December 31 2012). VER investments comprised fixed income investments of 52.3 (54.6) per cent, equities of 39.2 (38.4) per cent, and other investments of 8.5 (7.0) per cent.
The return of fixed-income investments was -2.0 per cent and the return of stock investments was 4.3 per cent. Other investments reached a 1.6 per cent return.
The development in the investment market has been two-fold at the beginning of the year. The significant rise in the stock market at the beginning of the year turned in the second quarter. The downturn in the stock market was caused by worries about an increase in interest rates. The mood returned positive during the summer due to assurances by central banks that interest rates would remain low for a long period. In the United States, signs of economic growth are positive, but the same cannot be said elsewhere, says Managing Director Timo Löyttyniemi.
Total returns on pension fund contributions during the first half of the year amounted to 830 million euros, which corresponds to figures from last year. A total of 840 million euros of VER assets had been transferred to the state budget by the end of June. During 2013, VER will transfer more funds to the state budget than it is estimated to accumulate in pension contribution returns.
Market situation
The development of the global economy has been underwhelming during the first two quarters. Expectations of growth have been postponed. Central banks in Europe and Japan have abided by a reviving monetary policy. The United States Federal Reserve System, however, has stated that it will be decreasing the size of its debt programme if the economic situation continues to improve in terms of central economic figures. The economy in China showed surprisingly weak economic figures in May to June. This caused a significant decrease in risk taking, which showed especially in the weak development of emerging market bonds and stock indices.
Fixed income investments
The return on fixed income investments was -2.0 per cent, while the corresponding figure for the whole of 2012 was 8.8 per cent.
Fixed income investments yielded a moderate profit during the first two quarters, but turned negative due to the strong and rapid increase in interest rates in May to June. By the end of June, this increase subsided and the market showed positive development. The highest returns in the interest asset categories were yielded by High Yield and Investment Grade level loans.
Quoted equity investments
The return on equity investments was 4.3 per cent, while the corresponding figure for the whole of 2012 was 16.8 per cent.
The year started off with a bang with increasing share prices in the global stock market. As the summer approached, nervousness started to increase among investors, and June, in particular, was a bad month for equities. Nervousness was mainly caused by investors’ doubts over the continuance of the massive resuscitation measures of the Federal Reserve System in the United States. China has also caused nervousness in the market as the country’s economic growth has decelerated from the very high growth figures seen in previous years. In the period under review, the highest equity return for VER was yielded by investments in Japan and the weakest by emerging market shares.
Other investments
Return on other investments was 1.6 per cent, while the corresponding figure for the whole of 2012 was 3.5 per cent.
The returns on all other VER investment types were positive at the end of the quarter. The beginning of the year was very strong for absolute return funds. The challenges in the equity and fixed-income investment market started to show in the absolute return fund stock portfolio in May, which resulted in modest return in June. Of other investments, the best return was yielded by Private Credit funds investing in debt funds.
For further details, please contact:
Managing Director Timo Löyttyniemi, tel. +358 9 2515 7010, mobile +358 50 336 2094
The State Pension Fund (VER) is a fund external to the state budget, established in 1990, whose proceeds the Finnish state uses to prepare for the financing of future pension liabilities and the balancing of pension costs. VER is an investment organisation. The function of VER is long-term management of the assets that are entrusted to it with a view to ensuring the security, returns, and liquidity of investments and their appropriate diversity and diversification.
www.statepensionfund.fi/
VER KEY FIGURES
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30.6.2013
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30.6.2012
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31.12.2012
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Investments, MEUR (market value)
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15 429
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14 379
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15 359
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Fixed-Income investments
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8 069
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7 803
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8 380
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Quoted equity investments
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6 053
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5 546
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5 899
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Other investments
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1 308
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1 030
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1 080
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The breakdown of the investment portfolio, %
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Fixed-income investments
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52,3 %
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54,3 %
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54,6 %
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Quoted equities
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39,2 %
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38,6 %
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38,4 %
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Other investments
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8,5 %
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7,2 %
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7,0 %
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1.1-30.6.2013
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1.1-30.6.2012
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1.1-31.12.2012
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Return on investments, %
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0,6 %
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4,8 %
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11,3 %
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Fixed-income investments, %
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-2,0 %
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4,1 %
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8,8 %
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Quoted equity investments, %
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4,3 %
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6,4 %
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16,8 %
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Other investments, %
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1,6 %
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1,7 %
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3,5 %
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Pension contribution income, MEUR
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830
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832
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1 639
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Transfer to state budget, MEUR
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840
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821
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1 604
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Net premiums, MEUR
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-10
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10
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35
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The figures in this release have not been audited.