Finnish pension company Varma returned 2.6 per cent on its investments in the first half of 2023, its half-year report has revealed.

This represents an improvement of 6.9 percentage points compared to the same period in 2022, when the pension company returned -4.3 per cent.

During H1 2023, the value of Varma’s investments increased from €56.2bn to €57.4bn.

The pension company noted that, of its investments, US stocks yielded the best returns in the first half of the year.

Its return on equities was 5.2 per cent, a significant increase from the -17.1 per cent equity return seen in H1 2022.

Meanwhile, its fixed income investment return also improved year-on-year, from -4.6 per cent to 1.8 per cent, while its capital investments returned 3.9 per cent and its hedge fund investments returned 1.4 per cent.

However, Varma’s return on real estate investments was negative in H1 2023, at -3.3 per cent.

“The beginning of the year was twofold from the point of view of investments,” explained Varma CEO, Risto Murto.

“There were exceptionally large differences within the investment portfolio. Of Varma's investments, US stocks yielded well, while the performance of Finnish stocks was the weakest among the industrialised countries. It seems that Finland is going into an industrial recession.”

Varma’s solvency ratio fell slightly during the first half of the year, from 130.5 per cent to 129.9 per cent, while its solvency capital in relation to the solvency limit also decreased, from 1.8 times to 1.7 times.

Varma director responsible for investments, Markus Aho, commented: “In general, the atmosphere in the investment market was positive in the second quarter, and the enthusiasm around artificial intelligence also aroused optimism for the future, which increased the valuation of technology companies.

“However, there were also asset classes, such as real estate, whose returns were negative. These asset classes are only just adapting to the new investment environment brought about by tight monetary policy.

“Communication from central banks suggests that the interest rate peak would soon have been reached. If the global economy continues to be as strong as it is now, however, interest rates are not in sight.

“A situation where you get a return on interest-rate investments is still healthier from the investor's point of view compared to a zero interest rate level.”

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