Finnish pension provider, Keva, responsible for the pensions of public sector workers in the country, has reported a return of -6 per cent in the first half of 2022.

Publishing its interim results, Keva said that at the end of June its investments had a market value of €62.5bn, compared to €63.3bn a year earlier.

The return was 7.5 per cent on private equity investments, 6.1 per cent on hedge funds and 3.3 per cent on real estate investments (including real estate funds). Fixed income investments generated -8.6 per cent and listed equities -12.6 per cent.

Listed equities and equity funds accounted for 32 per cent of Keva’s entire investment portfolio and fixed income investments (including the impact of derivatives) accounted for 28.9 per cent. Of the other asset classes, private equity investments accounted for 19 per cent, hedge funds for 7.4 per cent and real estate investments for 7.1 per cent of the portfolio.

Keva CEO, Jaakko Kiander, believes the decrease in investment value has remained moderate.

“The war in Ukraine and the rapidly rising inflation generated a sharp decrease in share prices at the beginning of the year, which could have led to an even weaker result,” Kiander said.

According to Kiander, the funding of local government pensions is still on a firm financial footing.

Keva’s long-term return on investments has been very good. The cumulative, capital-weighted real return on investments since funding began in 1988 to the end of June 2022 was 3.9 per cent a year. The average real return, excluding capital weighting, over the same period was 5.1 per cent. The real return, excluding capital weighting, over the past five years has been 2.9 per cent and the 10-year real return 5 per cent.

According to Keva CIO, Ari Huotari, the investment portfolio was also affected by rising interest rates, which made the existing fixed income investments fall into the red.

“Since the end of June, the stock market has experienced a significant improvement. However, the prospects for the rest of the year remain worrying,” Huotari said.

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