Finland’s Keva, which is responsible for the funding of local government pensions, has reported a total return of 15.8 per cent for 2021, equating to €9.1bn.

Of Keva’s investment assets, the best performers were private equity investments at 48.3 per cent, listed equities at 19.9 per cent and hedge funds at 17.3 per cent. The return on real estate investments was 9.6 per cent and fixed income investments 1.4 per cent.

Keva’s investment assets had a market value totalling €66.8bn at year-end 2021. Of this, listed equities accounted for 35.8 per cent, fixed-income investments (including the impact of derivatives) for 35.8 per cent, private equity investments (including unlisted equities) for 16 per cent, hedge fund investments for 6.4 per cent and real estate for 6 per cent of risk-based distribution.

”Investment performance was exceptionally good. It was driven by strong growth in global stock markets and successful allocation choices,” Keva CEO, Jaakko Kiander, said.

The return on private equity investments, excluding unlisted equities, was 51.4 per cent in 2021. Keva CIO, Ari Huotari, stated that this was driven by strong economic growth, the very good financial development of investees and a record number of breakaways. On top of which, valuation levels were up and the market was marked by a strong sense of optimism.

“The good return on private equity investments is the result of systematic work. The portfolio has been constantly and determinedly built up since back in the 1990s. For example, the average return on private equity investments over the past 10 years is 17.2 per cent,” Huotari said.

Huotari believes that a successful strategy and adequate diversification combined with high-quality, responsibly-operating asset managers creating added value, are the basis for good performance. Headed by Keva senior portfolio manager, Markus Pauli, the small, cohesive private equity investments team has boldly developed investment operations and challenged old business models.

“We now have a good quality private equity investment portfolio, which withstands various market conditions and which we can continue to expect to perform well,” Pauli said.

However, the year currently underway is marked by exceptionally great uncertainty.
“At the time of writing, the geopolitical situation in Europe is highly uncertain. A set of circumstances, which at worst could erupt into military intervention, is causing concern on the markets. At the same time, the effects of global inflation on the actions of central banks and thus interest rates are being considered. Nor should it be forgotten that earlier actions by central banks have inflated risky markets to record levels,” Huotari noted.

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