DROP IN SHARE PRICES FELT IN INVESTMENT RETURNS
The return on Ilmarinen’s investments in January–September was 3.1 per cent (5.7 per cent on 30 Sept. 2014). The long-term return remained at a good level, at 5.9 per cent. At the end of September, the market value of Ilmarinen’s investment assets totalled EUR 35.2 (34.1) billion.
“Even though the July–September period was challenging, particularly in the equity markets, the return in the first nine months of 2015 can still be considered reasonable,” estimates Ilmarinen’s CEO, Timo Ritakallio.
Investments in listed equities yielded 3.7 (8.0) per cent, fixed income investments 0.1 (3.1) per cent and real estate investments 4.3 (4.0) per cent.
The third quarter of 2015 was the weakest quarter in the equity markets for four years.
“Concerns over the slowing down of China’s economic growth and its repercussions on global growth unnerved investors, leading to sales pressure in both developed and emerging equity markets. Low interest rates also caused headaches for investors,” says Ritakallio.
Ilmarinen’s long-term investment return remained on a good level. The real return on investments since 1997 was 4.1 per cent. The Finnish Centre for Pensions uses a 3.5 per cent expected real return rate to estimate the future development of earnings-related pension insurance contributions.
Ilmarinen’s solvency remained at a good level. At the end of September, Ilmarinen’s solvency capital was EUR 7.8 (8.0) billion. This was 28.6 (30.3) per cent of the technical provisions and 2.3 times (1.9) the solvency limit.
Ritakallio stresses that pension assets are protected by Ilmarinen’s solvency buffers:
“It is precisely for financial quarters such as this one that solvency buffers are needed. Our strong solvency protects pension assets from market fluctuations, also during more challenging times.”
“Rest of 2015 difficult to forecast”
According to CIO Mikko Mursula, the rest of the year will be uncertain from an investor’s viewpoint. The focus will be on the growth prospects for the global economy and the actions of the central banks.
“Investors are now paying special attention to indicators in the Chinese economy. China is the world’s largest trading country, so its outlook and development affect the global economy in its entirety,” Mursula points out.
International investors are also keeping a watchful eye on companies’ third-quarter results, which are believed to project the global growth outlook for the rest of the year.
“Based on the reported financial figures, we will aim to estimate, for example, the financial direction of the Asian and U.S. economies. Special attention will also be focused on the impacts of exchange-rate changes, low commodity prices and interest rates,” says Mursula.
In Mursula’s opinion, real estate investments bring stability to the portfolio during turbulent times.
“The return on those investments has been consistently stable. We will continue to diversify our investment portfolio internationally, striving to, among other things, compensate for the weak demand in the Finnish rental market for commercial real estate,” Mursula explains.
“In a world of low interest rates, investors are forced to find an alternative to fixed income investments. That fact is not about to change anytime soon,” he says.
Attachments: Ilmarinen Q3 2015
For more information, please contact:
Timo Ritakallio, President and CEO, tel. +358 10 284 3838, +358 500 536 346
Mikko Mursula, CIO, tel. +358 010 284 3840, +358 050 380 3016
Jaakko Kiander, Senior Vice President, Finance and Governance, Pension Policy, tel. +358 10 284 2599, +358 50 583 8599
Päivi Sihvola, Senior Vice President, Corporate Communications and Human Resources, tel. +358 010 284 3590, +358 040 757 4992