“This is the first time we have to express dissatisfaction with the returns of Finnish shares,” stated Varma’s CEO, Risto Murto.
Last year, employment pension savings in Finland rose by over ten billion, as was made evident when the largest occupational pension investors announced their results on Friday.
Occupational pension institution Keva along with pension companies Ilmarinen, Varma, and Elo collectively increased pension savings by 10.9 billion euros last year. This substantial increase is relative to all pension assets, which stood at 238 billion at the end of 2022.
The significant increase was primarily due to the surge in the US stock markets at the year’s end.
“For a while, the market perceived that interest rate hikes were over,” Varma’s CEO Risto Murto commented on Friday during the announcement of the results.
On Friday, Varma, a major investor, boosted Finnish pension assets by 2.9 billion last year. Elo, a mid-sized company, increased pension savings by 1.9 billion euros.
Pension institution Keva and pension company Ilmarinen announced their results on Thursday, revealing a 6.1 billion euro increase in their total investment portfolio by 2023.
The decision to invest more in stock market shares in previous years has proven fruitful. For instance, Varma’s investment portfolio value has risen, leading to a growth of 37 billion euros in the pension assets they manage since 2009, totaling 59 billion euros currently.
The amount of pension savings was augmented by the 2023 investment return, with Varma and Elo each receiving six percent.
The highest 2023 investment result so far was reported by the public sector occupational pension institution Keva, which yielded a return of 6.8 percent on pension savings. Ilmarinen received investment returns of 5.8 percent in 2023.
Varma’s CEO Murto considered the result “good given the goal” of the pension investor. A diversified portfolio was key to this success.
All pension investors needed to diversify as real estate investments underperformed and the Finnish stock market remained static.
“Issues in the real estate market will persist this year,” Murto stated on Friday.
Murto was particularly concerned about the shares traded on the Helsinki stock exchange and the development of the Finnish stock market.
He issued a “word of caution”.
“For the first time, we have to express dissatisfaction with the return on Finnish stocks. They haven’t been competitive in recent years, which is a significant issue for us,” said Murto, who joined Varma in 2006.
Since 2022, Murto noted, the returns on the Finnish stock exchange have been considerably weaker than in other countries. Despite Finland having well-managed and high-quality companies, Sweden has outperformed in terms of industrial impact.
“For the first time in a while, we must question if we have a larger problem at hand. The ability of the economic life’s shoulders to support Finland’s welfare state has weakened.”
Murto sees the green transition as a potential opportunity for Finland.
“We have the space and desire to build wind power. However, the issue in the past six months is that we seem to have botched the government’s support policy,” said Murto.
Murto predicts that Finland is likely to experience a challenging economic spring.
“The construction cluster’s difficulties are escalating. The only mitigating factor is that unemployment numbers aren’t decreasing as we have been accustomed to seeing. Finland needs interest rate cuts,” remarked Murto.
Faith in Europe is also shaky.
“One must be brave to state that the next five years will be Europe’s time,” predicted Varma’s CEO.
