Finland’s Keva, which is responsible for the funding of local government pensions and the investment of pension funds, reported a return of -2.3 per cent for the first quarter (Q1) of 2022, it has revealed.

At the end of March, Keva’s investments had a market value of €65.2bn compared to €60.9bn a year earlier.

Commenting, Keva CEO, Jaakko Kiander, said: “Whereas market reactions triggered by the war in Ukraine have so far been moderate, we are heading towards hard times. Rising inflation will weigh on investment returns at least this year. A lot depends on the development of the European energy situation and the reaction of central banks.”

Keva’s investment operations generated a market value return of -2.3 per cent in the first quarter. The return was 3.5 per cent on equity investments, 2 per cent on hedge funds and 0.8 per cent on real estate investments (including real estate funds). Fixed income investments generated -3.3 per cent and listed equities -4.9 per cent.

Listed equities and equity funds accounted for 37.8 per cent of Keva’s entire investment portfolio and fixed-income investments (including the impact of derivatives) accounted for 32.1 per cent. Of the other asset classes, equity investments accounted for 17.3 per cent, hedge funds for 6.8 per cent and real estate investments for 6.2 per cent of the portfolio.

The cumulative, capital-weighted real return on investments since funding began in 1988 to the end of March 2022 was 4.2 per cent a year. The average real return, excluding capital weighting, over the same period was 5.3 per cent. The real return, excluding capital weighting, over the past five years has been 4.3 per cent and the ten-year real return 5.6 per cent.

Keva CIO, Ari Huotari, said that the stock markets have ultimately been surprising calm in their reactions during the first three months, given that a major war has broken out in Europe.

“Especially when even before the war, the markets had concerns about the rapid rise in inflation and rising interest rates. Actual increases in interest rates have already hit existing fixed income portfolios,” Huotari added.

Huotari said that the direct implications of the war in Ukraine on investments in Russia have been minimal for Keva.

Share Story: