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 seven 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 the five largest earnings-related pension companies: Elo 1, Veritas, Etera, Ilmarinen ja Varma. The earnings-related pension assets managed by these insurers account for about 99.7 per cent of the total amount of earnings-related pension assets managed by all pension companies.

(1) Elo is included as of 1 January 2014. Before that, data were given on Elo’s predecessors, Pension Fennia and LocalTapiola Pension.

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 2008–2017

The overall trend in the investment returns of the five largest pension insurers has been quite satisfactory over longer periods of time even though the impact of the poor investment years 2008 and 2011 is evident, especially during the ten-year period (2008-2017).

Fixed-income investments have yielded a steady return between years 2008-2018. However year 2015 was exceptional when fixed-income investments generated very moderate revenues. 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 very low for some time. In 2017, returns were hard to come by, especially in the government bonds of developed countries, but returns from the government bonds of developing countries and from risky corporate loans have still remained at a reasonable level.

Recently, good economic figures from various continents have supported stock markets. In consequence of the long-lasting stimulating monetary policy pursued by the central banks, interest rates in developed countries have fallen to record-low levels. The expected future returns on them have therefore diminished.

The impact of the crisis years 2008 and 2011 is very clear in equity investments; shares have been divided into two classes. Private equity investments and especially unquoted shares generate good returns even when the value fluctuation in quoted shares is wide. Private equity investments and investments in unquoted shares are good for diversifying the total risk of the portfolio since the values of quoted shares traded on the stock exchange can vary widely along with the general market trend.

Quoted shares have a major impact on the total return on equity investments, since quoted shares accounted for 78–90 per cent of all equity investments in 2008–2017. Quoted shares also have an important impact on total returns, since quoted shares accounted for 24–35 per cent of all investments by pension insurance companies in 2008–2017 (excluding 2008). In 2008 the share dropped to 16 per cent due to the financial crisis. In 2017, the share was 34 per cent.

Real estate investments have yielded steady returns and have secured the capital invested against inflation. For shorter time periods, during the past five years, the returns on direct real estate investments have fallen behind the returns obtained from real estate investment funds and collective investments. In contrast, during a longer time period of ten years, the returns on direct real estate investments are clearly better.

Other investments consist of what are known as alternative investments. Returns on these investments are mainly returns generated by investments in hedge funds. No long return series are available for the sub-categories of other investments, commodity and other investments. This is because group averages are not available in these categories for all the years between 2008 and 2017. In consequence, averages cannot be calculated for periods that include these missing years.