Ilmarisen sijoitusjohtaja Mikko Mursula, muotokuva.
Uutinen 20.3.2017


From the perspective of investment returns, 2016 was twofold. The early part of the year was marked by a strong decline in share prices, and Ilmarinen’s investment returns also remained in negative territory. Towards the end of the year, performance improved clearly. Ilmarinen’s investments yielded 4.8 per cent and the market value of investments rose to EUR 37.2 billion. For 2017, investors’ expectations are clearly more optimistic than a year ago: global economic growth is forecast to pick up and companies’ earnings are expected to improve. The political uncertainty brought about by the Brexit referendum and the US presidential election, which rocked the markets in 2016, will continue this year too.

Ilmarinen’s CIO Mikko Mursula, how would you describe the 2016 investment year?

The investment year was colourful and eventful and marked by a series of political events. The Brexit referendum and the US presidential election fuelled political uncertainty, causing stock price volatility. From the perspective of investment returns, the year was twofold: during the first half of the year, returns were weak in almost all capital markets, while the second half was very good in almost all capital markets.

Where was Ilmarinen most successful and where is there still room for improvement? 

Ilmarinen succeeded well in its overall allocation, i.e. in diversifying investments across the various asset classes. We achieved the best return on investments in non-listed equities and shares, and Finnish equities and shares also performed very well. Diversifying our real estate portfolio in line with our long-term investment strategy has been a success.

We did less well in selecting other European equities and shares, which proved to be a disappointment. As a whole, Europe was the weakest performer among the main equity markets, and our substantial overall allocation in European equities weakened the return on listed equities. 

The interest rate level has been at an all-time low – how did it affect Ilmarinen’s fixed income investments?

The return on Ilmarinen’s fixed income portfolio was, in the end, moderate. As in previous years, this can largely be explained by the continuing decline in the interest rate level, resulting in capital gains for the equity portfolio. However, we have maintained the fixed income portfolio’s duration at a low level, which translates into a low overall risk level for the portfolio and makes us prepared for a possible rise in interest rates.

What are investors’ expectations for 2017?

Investors’ expectations for the current year are fundamentally optimistic – quite a contrast to last year’s sentiment. Global economic growth is expected to pick up this year and companies are expected to be able to improve their earnings compared to last year.

The biggest question is what will happen to the interest rate level around the world. In the US, the Fed has already started its interest rate hikes, and markets are expecting two or three more hikes to take place in 2017. It remains to be seen whether the interest rates of emerging economies and Europe will follow suit.

What does Europe’s busy election year look like from an investor’s perspective?

Political uncertainties, which are still abundant, will increase share price volatility, fuelling uncertainty in the markets. Last year was largely marked by elections and political events, and there is every reason to believe that this year will continue along the same lines. Important elections will take place in France and Germany, among other European countries. Their outcome will have an impact on market development.

Where can an investor expect to achieve the best returns this year?

The outlook in the equity markets is fundamentally positive. Despite a slight rise at the turn of the year, the interest rate level is still very low in absolute terms and when put into a longer-term historical perspective. It continues to steer money away from fixed income investments towards other asset classes, with equities, both listed and non-listed, in the lead, followed by various real asset classes, such as real estate and different kinds of infrastructure projects to which investors are currently turning for stable returns.

What regional differences can be expected in market development?

Economic growth in the US is forecast to pick up. In Europe, too, recent signs of economic growth have been more positive than in a while. There is reason to expect both the US and European markets to perform fairly well from an investor’s perspective this year. One cause for concern, however, is the share price rally that has continued since the financial crisis and, as a result of this prolonged rise, the equity market valuation level is already quite high in many instances.

Investors will also focus their attention on emerging economies, where we will most likely see significant differences between countries and regions. Some emerging markets are more sensitive to interest rates than others. What the Fed does and how the dollar develops will have a major impact on the development of emerging markets.

Investors continue to show great interest in China, as they did a year ago. At the moment, there is not much talk among investors about China facing a hard landing, i.e. a sharp slowing down of its economic growth, nor are investors overly concerned about it, even though a year ago it was one of their biggest concerns. In early 2016, signs of overheating could be seen in China, for example, in the form of exponential debt growth. The Central Committee has, to some extent, managed to calm down the situation, and currently there are no such signs in the air.


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