State Pension Fund earns 7.8% return on investments

Press release 28th January 2015

Preliminary figures on return on investments in 2014

State Pension Fund earns 7.8% return on investments

The return on investments made by the State Pension Fund (VER) reached 7.8 per cent in 2014 (6.4 per cent in 2013). VER’s five-year annual average return is 6.8 per cent and the ten-year average 5.5 per cent.

At the end of 2014, the market value of the Fund’s assets amounted to EUR 17.6 billion (EUR 16.3 billion in 2013). Of all VER’s investments, fixed-income instruments accounted for 50.4 (51.6) per cent, equities for 39.5 (39.9) per cent and other investments for 10.1 (8.5) per cent.

Fixed-income instruments returned 4.9 per cent and equities 11.7 per cent. With alternative investments the rate of return was 7.8 per cent.

“Last year the development of the world economy was mixed. Growth was strong in the United States but no signs of recovery were visible globally. As a result of low inflation expectations, monetary policies remained lax across the world. This enabled low interest rates and consequently the return on fixed-income investments and equities was sound despite intense fluctuations.  The 7.8 per cent return earned by VER may be considered good,” says Managing Director Timo Löyttyniemi.

The Financial Statements Bulletin for 2014 will be published on 26 February 2015.

Inquiries:

Timo Löyttyniemi, Managing Director of the State Pension Fund, tel. +358 (0)9 2515 7010 or +358 (0)50 336 2094

Established in 1990, the State Pension Fund (VER) is an off-budget fund through which the State prepares to pay for future pensions and contribute to balancing the foreseen deficit in pension financing. VER is an investment organisation responsible for professional investing of the State’s pension assets. At the end of 2014, the market value of the Fund’s investment portfolio stood at EUR 17.6 billion.

www.ver.fi

Year 2014 in brief

Market conditions

After a slack period in early 2014, the growth of the world economy accelerated only to weaken again in the third quarter.  The crisis in Ukraine and the imposition of sanctions clearly hampered economic development in Germany, which serves as the engine of growth in the euro zone. At the same time, economic growth in China slowed down as the country’s investment-driven growth model was recalibrated towards a consumption-based one. By contrast, economic growth in the United States and the United Kingdom remained robust after a slow period in early 2014 and was sustained until the end of the year.  As a result, the central banks of these two countries are expected to gradually tighten their monetary policies unlike the European Central Bank and the Bank of Japan that will continue to pursue a reflationary monetary policy. Raw material prices, especially oil, fell sharply during the reporting period.

Fixed-income investments

Fixed-income instruments returned 4.9 per cent in 2014 as compared to -1.6 per cent in 2013.

Overall, the 2014 return on the fixed-income portfolio was good. Interest rates fell clearly throughout the year. In particular, long-term peripheral debts and dollar-denominated emerging market debt generated an excellent return.

Listed equities

The return on listed equity investments was 11.7 per cent as compared to 18.2 per cent in 2013.

Equities gave a healthy return in 2014. While VER’s highest returns were earned on equities in the North American stock markets due to the strengthened US dollar, investments in other markets also yielded a good return. A great deal of uncertainty was experienced in the investment markets during the past year, partly as a result of geopolitical tensions. Not surprisingly, a couple of major dips occurred in the equities markets in the last quarter. Nevertheless, the markets recovered fairly quickly, and the year ended with healthy yields.

Alternative investments

The return on alternative investments was 7.8 per cent as compared to 5.7 per cent in 2013.

In the alternative investments, year-end returns were positive in all asset classes.  The highest return was earned on private equity investments that benefited from the bullish equity markets, followed by real estate investments.

 VER KEY FIGURES

 All the figures presented in this bulletin are preliminary and unaudited.