Finnish pension company Varma has reported that its return on investments in 2022 was -4.9 per cent, down from 18.5 per cent in 2021.

During the same period, the value of its investments fell from €59bn to €56.2bn.

Varma noted that while the strengthening of the European equity market in the fourth quarter of 2022 had softened losses, its return remained negative over the year.

The losses, as with many pension funds and companies from across Europe, were attributed to the war in Ukraine and rising inflation and interest rates, which all impacted financial markets.

Varma’s equity investments returned -8.7 per cent in 2022, down from 32.2 per cent in 2021, while its fixed income investments returned -5.2 per cent, down from 1.9 per cent.

On the other hand, Varma saw positive returns on its capital investments (7.9 per cent), real estate investments (5.7 per cent) and hedge funds (2.3 per cent).

Despite these positive results, returns on all asset classes were lower than in 2021.

During the year, Varma’s solvency ratio fell from 139.4 per cent to 130.5 per cent, while its solvency capital was 1.8 times the solvency limit, down from 2 time the limit in 2021.

“Last year there were a lot of threatening images in the investment market, such as Russia's war of aggression against Ukraine, strongly accelerated inflation and interest rate hikes by central banks,” said Varma CEO, Risto Murto.

“We can be satisfied that the decline in the market was limited compared to the market reactions that followed the financial crisis and the corona pandemic.”

Varma head of investments, Markus Aho, added: “The changes [in Q4] calmed the market, which was reflected especially in the strong performance of European stocks at the end of the year.

“The opening of China after the corona lockdown has also had a stimulating effect on the market.

“The worst expectations from the recession have not come true, although we still have no certainty as to what the investment environment will develop into.”

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