Press release, 22.8.2012
Published 2012-08-22 at 9:00
Press release, 22 August 2012
4.8 per cent return on investment for the State Pension Fund
The return on investment of the State Pension Fund (VER) for the period from 1 January to 30 June 2012 was 4.8 per cent, while the corresponding figure for the whole of 2011 was -2.3 per cent. The geometric mean of VER’s five-year return was 2.0 per cent, while the geometric mean for VER’s ten-year return was 5.4 per cent.
The market value of VER’s investments was 14.4 billion euros at the end of June (13.7 billion euros on December 31 2011). VER investments comprised fixed income investments of 54.3 (56.6) per cent, equities of 38.6 (36.4) per cent, and other investments of 7.2 (6.9) per cent.
The return of fixed-income investments was 4.1 per cent and the return of stock investments was 6.4 per cent. Other investments reached a 1.7 per cent return.
Our return on investment was good at the beginning of the year. This positive development has continued throughout the summer. The state debt crisis in Europe may cause occasional surprises in the market. The interest rate of government loans for countries in a better economic situation is starting to become quite low for investors. This has resulted in investors increasing their investments in corporate bonds and other targets yielding extra return, says Managing Director Timo Löyttyniemi.
Total returns on pension fund contributions during the first half of the year amounted to 829 million euros. This accumulation is 15 million euros more than the corresponding figure from 2011.
A total of 821 million euros of VER assets had been transferred to the State budget by the end of June. The corresponding figure for the period 1 January to 31 June 2011 was 774 million euros.
Market situation
Prospects for the global economy brightened during the first months of 2012. The Eurozone debt crisis also breathed a sigh of relief in the beginning of the year. This was thanks to the ECB’s two massive financing projects, in which it brought over a trillion euros in three-year investments to the market with an interest of 1 per cent. During the spring, however, hopes of development in the near future faded away. This uncertainty manifested in a weakening of the confidence indicators, in stock index decline, in a slowing down of world trade, and in the decline of oil price.
Fixed income investments
The return on fixed income investments was 4.1 per cent, while the corresponding figure for the whole of 2011 was 4.1 per cent.
The return on fixed income investments remained good in the first two quarters despite the record low interest rates. The long-term German government bond interest rates declined during the beginning of the year until the beginning of June. In June, the direction changed and these interest rates increased until the end of the month. In the beginning of the year, the difference of the interest rates in periphery countries in relation to German government bonds decreased, but this favourable development turned at the end of the period. High-yield and emerging market bonds yielded the highest returns during the first half of the year.
Quoted equity investments
The return on equity investments was 6.4 per cent, while the corresponding figure for the whole of 2011 was -12.3 per cent.
The first two quarters ended on a clearly positive return for equity investments. The equity market was on the rise primarily during the first quarter, but April and in particular May were weaker months for equities. The market was weary of the financial situation of Spanish banks in particular and the possibly resulting wider spread bank crisis. June was, however, a positive month for equities, mainly due to the strong increase in share prices on the last trading day of the second quarter. The highest equity return for VER was yielded by investments in North America and the emerging markets, the weakest by Nordic shares.
Other investments
Return on other investments was 1.7 per cent, while the corresponding figure for the whole of 2011 was 6.1 per cent.
The returns on other investment types, with the exception of real estate investments, were positive at the end of the quarter. A strong stock market at the beginning of the year contributed to the return of private equity investments from the first half of the year. Absolute return funds benefited from the positive development of the structured loan markets during the period of evaluation, among other things. The best returns out of other investments were yielded by infrastructure investments.
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.ver.fi
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VER KEY FIGURES
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30.6.2012
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30.6.2011
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31.12.2011
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Investments, MEUR
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14 379
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13 855
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13 736
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(market value)
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Fixed-Income Investments
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7 803
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7 662
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7 781
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Quoted Equity Investments
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5 546
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5 328
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5 006
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Other Investments
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1 030
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865
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948
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1.1.-30.6.2012
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1.1.-30.6.2011
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1.1.-31.12.2011
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Return on Investments, %
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4,8 %
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-0,7 %
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-2,3 %
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Fixed-Income Investments %
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4,1 %
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1,0 %
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4,1 %
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Quoted Equity Investments, %
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6,4 %
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-3,4 %
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-12,3 %
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Other Investments, %
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1,7 %
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2,4 %
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6,1 %
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Pension Contribution Income, MEUR
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829
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814
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1 609
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Transfer To The State Budget, MEUR
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821
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774
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1 509
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Net Premiums, MEUR
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10
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43
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104
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The figures in this release have not been audited.