Finns’ occupational pension funds grew by €10bn during the first half of the year, with a total of €261bn in assets at the end of the period, figures from the Finnish Pension Alliance (Tela) have revealed.

According to the update, the positive development of pension investments continued during the second quarter, despite the weak state of the domestic economy, with growth in Q2 reaching around €3bn.

Tela revealed that the nominal return on earnings-related pension funds for the first half of the year was 5.2 per cent, while the real return, which takes into account inflation as a factor reducing the total return, was 4.6 per cent.

In particular, Tela analyst, Kimmo Koivurinne, said that the increase in assets during the first six months of 2024 was largely thanks to listed shares.

"In addition to stock investments, alternative investments also yielded relatively well," Koivurinne explained.

"The positive mood of the market was supported by the levelling off of inflation and expectations of interest rate cuts."

However, Tela noted that whilst the amount of pension assets has risen to its highest level so far, at the same time, growing concerns have been raised about the weak returns of domestic equity investments.

In total, about 20 per cent of the funds have been invested in Finland, just under 17 per cent in the rest of the euro area and just under 64 per cent outside it.

Shares and share-type investments accounted for 57 per cent, or €149bn, of the total assets of €261bn, with 15 per cent of this invested in Finland, 15 per cent elsewhere in the euro area and 70 per cent outside the euro area.

However, Tela acknowledged that the relative share of domestic equity investments has halved in two decades, as in 2004, the share of domestic shares in occupational pension funds was around 30 per cent.

"During the last few years, the Helsinki stock exchange has produced relatively lower returns than, for example, European or North American stocks," Koivurinne explained.

"Diversification is, however, at the core of occupational pension insurers' investment strategies, and its role remains important both geographically and in terms of asset types.

"Diversification enables the pursuit of at least reasonable returns, even if strong market fluctuations are seen somewhere in the world."

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