Last year (2022) was the worst investment year for pension investors since the financial crisis in 2008, according to international analysis by the Finnish Centre for Pensions (ETK).

ETK assessed 24 of the largest pension investors across nine countries and found that the average nominal return was -8.4 per cent over the year, while the average real return was -14.7 per cent.

The average real return of the pension investors in 2008 was -15.7 per cent.

“Russia’s war in Ukraine, high inflation and the rapidly tightening monetary policy of central banks darkened the economic outlook and hammered pension investors both in the stock and the interest rate markets,” explained ETK liaison manager, Mika Vidlund.

Finnish pension investors performed above average with an average real return of -11.5 per cent, while Sweden’s AP6 had the best result out of the investors surveyed with -6 per cent.

According to ETK, Danish and Dutch pension investors were hit the hardest, with its analysis finding that the real return of Danish pension fund ATP, whose portfolio consisted mainly of long-term interest-bearing securities, was almost -38 per cent in 2022.

Meanwhile, the Netherlands’ ABP and PFZW had average real returns of -25 per cent and -29 per cent respectively.

The real return of Norway’s Government Pension Fund Global was -13 per cent, with its result being improved by the weakening Norwegian krone in relation to other main currencies.

ETK noted that poor results in the bond markets and the shrinking investment assets of pension investors were compensated by nearly equally high reductions in pension liabilities.

This means that the solvency ratio was not compromised due to a single weak investment year.

“The very harsh investment year of 2022 has affected, in particular, the average five-year return which, for some actors, fell into the negative,” said ETK special adviser, Antti Mielonen.

“Long term, however, the return has remained at a moderate level. Investing pension assets is a long-term activity.

“That’s why we have now added a return comparison of a period spanning 15 years.

“Depending on the allocation of the investment portfolio and other factors, the fluctuation in returns may be large from one year to another, which is why short-term returns may be unduly emphasised from the point of view of pension investing.”

The international comparison of investment returns made by ETK consisted of 24 pension investors from nine countries, including large investors from northern Europe, North America and Asia.

The comparison included eight pension investors from Finland.

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