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Returns by investment type

For pension insurance companies, it is possible to present group-specific descriptions of the long-term average returns on investments by applying a more precise breakdown of investment categories. This page summarizes the companies’ nominal average returns at the overall level and by the main investment category (fixed-income investments, equity investments, real estate investments and other investments).

Calculation of return figures

The figures presented here are based on information describing the breakdown of investment categories, collected on our page Quarterly information by pension provider. All existing pension insurance companies (Elo, Ilmarinen, Varma and Veritas) are included. The mergers that have taken place in the company field have been taken into account in the calculation of the data as follows:

  • Group returns prior to 2014 include Elo’s predecessors Pension Fennia and LocalTapiola Pension.
  • Group returns prior to 2018 include Etera, which merged with Ilmarinen at the beginning of 2018.

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).

Average annual investment returns of pension insurance companies

Average annual returns of pension insurance companies for different periods.

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).

Returns on fixed-income investments

Average annual returns on fixed-income investments by pension insurance companies for different periods.

Fixed-income investments yielded a steady return during 2011–2020. However, the 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 run, it is challenging to obtain returns on fixed-income investments, as general interest rates have been low for years.

In 2020, 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.

Returns on equity investments

Average annual returns on equity investments by pension insurance companies for different periods.

Equity-type investments can be divided into two categories. 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.

For equity investments, the year 2020 was relatively good given the global pandemic.

Returns on real estate investments

Average annual returns on real estate investments by pension insurance companies for different periods.

Real estate investments have (excluding the year 2020) 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.

Returns on other investments

Average annual returns on other investments by pension insurance companies for different periods.

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 returns during the last ten-year period. The average return profile of hedge funds stands between fixed income and equity, however with lower correlation.

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