Icelandic pension funds returned 3.6 per cent in the first nine months of 2024, minutes from the Central Bank of Iceland’s Financial Stability Committee (FSN) meeting reveal.

During its December committee meeting, the FSN was given a presentation on the pension funds’ position and investments. The minutes of the meeting revealed that the positive return was “sustained primarily by favourable developments in foreign share prices”.

At the end of quarter three, pension fund assets totalled ISK 8,000bn and had increased by ISK 630bn since the beginning of 2024. Of that total, mutual pension divisions’ foreign assets accounted for 41 per cent and had increased by just over 2 per cent, up to the end of quarter three.

The maximum permissible ratio of foreign assets held by mutual pension divisions increased by 1.5 percentage points on 1 January 2025, to 53 per cent.

The FSN was told that pension funds’ investment strategies assume that foreign assets will continue to grow in 2025, to about 43 per cent of total assets.

“The increased weight of foreign investment has mitigated concentration and helped diversify the pension funds’ investment portfolios. The funds still play an important role in financing in Iceland,” the minutes stated.

At the end of quarter three, about ISK 830bn, or 17.5 per cent of pension fund domestic assets, took the form of deposits, bonds, or equities issued by the commercial banks. Covered bonds accounted for the largest share, at ISK 338bn.

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