On this page, we present pension insurance companies’ group averages for long return periods by means of a detailed division into investment categories. For other pension insurer groups, i.e. public-sector pension insurers, company pension funds and industry-wide pension funds, the group averages for long return periods are presented using a more concise division into investment categories on the page Summaries of returns.

Only six largest pension investors can have the basic data divided into the more detailed investment categories on the page Quarterly information by pension provider. So far it is not possible to present these group averages for the smallest pension investors.

For pension insurance companies, the calculation comprises four earnings-related pension companies: Elo1, Veritas, Ilmarinen2 ja Varma.

(1) Elo is included as of 1 January 2014. Before that, data were given on Elo’s predecessors, Pension Fennia and LocalTapiola Pension.
(2) Etera merged with Ilmarinen at the start of 2018.

Pension insurance companies

Pension insurance companies’ nominal group averages for returns are presented at the total level and broken down by the main investment categories and sub-categories in the same way as in the information published quarterly.

The average group-specific returns on investments are calculated for periods of different durations: 1, 3, 5 and 10 years. The annual return figures are capital-weighted returns (MWR). Through the calculation of geometric averages, these annual return figures have yielded the average annual return figures for longer periods of time (TWR).

Observations of return averages in 2011–2020

The overall trend in the investment returns of the four largest pension insurers has been quite satisfactory over longer periods of time, especially during the five-year (2016–2020) and ten-year periods (2011–2020).

Fixed income investments have yielded a steady return during 2011–2020. However, years 2018 and 2019 were unusual when fixed income investments first generated moderate losses in 2018 followed by substantial returns in 2019. In the long term and, in fact, also in the shorter term, the returns on fixed-income investments have been good, especially when considering that the general level of interest rates has been exceptionally low for some time.

Last year, global markets were supported by central banks’ swift actions and the promising news regarding development of the COVID-19 vaccine. As a consequence of the extended stimulating monetary policy pursued by the central banks, interest rates in developed countries have fallen to record-low levels. Hence the expected future returns on fixed income have diminished.

For equity investments last year was relatively good given the global pandemia. Private equity investments and especially unquoted shares provide steady returns even when the volatility in quoted shares is high. Private equity investments and investments in unquoted shares are good for diversifying the total risk of the portfolio whereas the values of shares traded daily on the stock exchange may fluctuate widely due to market trends.

Quoted shares contribute greatly to the return on equity investments since quoted shares accounted for 75–85 per cent of all equity investments in 2011–2020. Quoted shares also contribute to total returns since quoted shares accounted for 30–40 per cent of all investments by pension insurance companies in 2011–2020. Quoted shares accounted for 40 per cent of all investments in 2020.

Real estate investments have (excluding last year) yielded steady returns and have secured the capital invested against inflation. Also excluding 2019 and 2020, the returns on direct real estate investments have fallen behind the returns obtained from real estate investment funds and collective investments.

Other investments are also known as alternative investments. Returns on these investments are mainly returns generated by investments in hedge funds. Investments in hedge funds have generated steady return during the last ten-year period. The average return profile of hedge funds stands between fixed income and equity, however with lower correlation.