Finnish public pension provider Keva, responsible for funding local government pensions, reported a return of 7.2 per cent, equivalent to €4.7bn, in the first nine months of 2024.

At the end of September 2024, Keva’s investments had a market value of €69.7bn, compared to €64.2bn a year earlier. During the period, contribution income amounted to €4.8bn and €5.5bn was paid out in local government pensions. Approximately 582,000 local government and wellbeing services county employees had earnings-related pension insurance at the end of September.

Keva is also responsible for state, church, the Social Insurance Institution of Finland and Bank of Finland pensions. During the first nine months of 2024, €4.2bn in state pensions, €202m in Evangelical Lutheran Church pensions, €96m in Social Insurance Institution of Finland (Kela) employee pensions and €25m in Bank of Finland pensions were paid out.

The state, Evangelical Lutheran Church, Kela and Bank of Finland pay their own pension expenditure and share of operating costs to Keva.

Keva CEO, Jaakko Kiander, said eyes have remained on the central banks’ actions and predicting their future actions.

“Economic development within the Eurozone has been rather modest and Germany’s economic issues in particular overshadow the future. The United States’ economic development on the other hand has been surprisingly strong. The central banks will most likely continue to diverge somewhat in the downward trajectory of their interest rates,” Kiander said.

In terms of asset class, the return on listed equities was 12.1 per cent, 5.9 per cent on hedge fund investments, 4.3 per cent on fixed income investments, 4.1 per cent on private equity investments (including unlisted equities), and 0.8 per cent on real estate investments (including real estate funds).

Over the longer term, the cumulative, capital-weighted real return on investments since funding began in 1988 to the end of September was 3.8 per cent a year. The average real return, excluding capital weighting, over the same period was 4.9 per cent. The real return, excluding capital weighting, over the past five years has been 2.4 per cent and the 10-year real return 3.7 per cent.

Listed equities and equity funds accounted for 40.2 per cent of Keva’s entire investment portfolio and fixed income investments (including the impact of derivatives) accounted for 27.2 per cent, whereas private equity investments accounted for 19.1 per cent. Of the smaller asset classes, real estate investments accounted for 6.7 per cent and hedge funds for 6.7 per cent.

According to the Keva CIO, Ari Huotari, the year has continued to favour higher-risk investments.

“There have been some concerns on the markets about the actions of the central banks and the general economic development, but despite momentary concerns the overall note has remained positive. Now it will be interesting to see what path and style of communication the central banks choose over the following months. The global economic development outlook poses challenges for the actions of the central banks,” he said.

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