Swedish pension investors delivered the strongest returns amid the global economic recovery following the Covid-19 pandemic, according to research from the Finnish Centre for Pensions (ETK).

The comparison, which included 24 pension investors from Northern Europe, North America and Asia, found that most schemes reached a real return of 10-20 per cent in 2021, with real returns on the US stock market highlighted as particularly favourable.

However, for the second year in a row, Swedish public pension scheme, AP6, secured the highest return of 46.2 per cent, thanks to its equity-only investments and specialisation in unlisted high-risk instruments.

This was followed by Sweden’s AP1, AP3 and AP4 schemes, which delivered returns of 18.4 per cent, 18.3 per cent and 16.9 per cent, respectively, having benefited from a large rise in the evaluation level of domestic equities and the weak Swedish krona in relation to the dollar and the euro.

Despite this, ETK noted that Finnish pension investors have made a steady return and fared better in this year’s comparison than in previous years.

Earnings-related pension provider, Varma, for instance, recorded the largest real return amongst earnings-related pension providers and company pension funds at 16.2 per cent, whilst Keva showed the highest return amongst Finnish buffer funds, at 13.5 per cent.

In addition to this, the average real return of Finnish earnings-related pension providers and company pension funds was higher than that of foreign pension investors subject to similar solvency regulations, at 13.1 per cent compared to 9.3 per cent.

Furthermore, whilst the average real return of Finnish buffer funds fell behind that of their foreign counterparts, at 12.6 per cent compared to 17.4 per cent, ETK said that this gap relates to the AP6 buffer fund, without which the return of Finnish buffer funds would be on the same level as that of foreign buffer funds.

ETK also noted that whilst Danish ATP delivered the weakest return of -1.8 per cent, this was “for an obvious reason”, as the investment allocation of this earnings-related pension fund differs from that of all other pension funds, as it is focused on fixed-income securities.

Commenting on the findings, ETK director, Allan Paldanius, said: “The different allocations of the pension investors led to large variations in investment returns.

"Listed shares and unlisted capital investments yielded exceptionally high returns due to the accommodative monetary policy. The real return on fixed income securities did not match inflation.”

Adding to this, ETK liaison manager, Mike Vidlund, noted that ATP reached one of its highest returns yet at 35 per cent for its smaller, equity based portfolio.

"Investments in unlisted instruments seem to explain the top results," he continued. "This is particularly underlined for AP6. It is also worth noting that Varma reported a nearly 50-per-cent return for that asset category."

Also considering a more long-term period, the survey revealed that the largest real return in 2012-2021 was 12.7 per cent from the Swedish buffer funds AP6, and 10.7 per cent for AP4.

The average annual return of the Finnish pension investors was 6.4 per cent during this period, meanwhile, which ETK noted was at the same level as that of some of the other actors included in the comparison, such as Alecta, PFZW and ABP.

“Last year’s excellent return raised the return of Finnish investors by two percentage points over a 10-year period," explained ETK special adviser, Antti Mielonen.

"Since the year of the euro crisis (2011), which was particularly difficult for Finnish investors, was excluded from the comparison, the gap to other investors has narrowed."

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