FIRST-QUARTER INVESTMENT RETURN COMES TO 7.1 PER CENT
The excellent return on Ilmarinen’s investment portfolio resulted in particular from the positive development of share prices on the world’s markets. The first quarter of 2015 was a record-strong one for Ilmarinen.
Ilmarinen’s investments brought in 7.1 per cent in returns in January–March, i.e. some EUR 2.4 billion (1.3 percent, i.e. EUR 426 million on 31 March 2014). The market value of Ilmarinen’s investments rose to EUR 37.0 (33.0) billion at the end of March.
According to President and CEO Timo Ritakallio, the investment year took off on an extremely positive note.
“Equities and shares yielded well in almost all of the markets. European and Chinese equities and shares brought in especially good returns. Real estate investments also brought in stable returns in line with our expectations,” says Ritakallio.
Investments in listed equities yielded 17.7 (0.8) per cent, fixed-income investments 1.2 (1.3) per cent and direct real estate investments 1.2 (1.2) per cent.
“The stimulating monetary policies of the world’s leading central banks, and particularly the bond purchase programme initiated by the European Central Bank in March, have given European equities a boost. The Helsinki Stock Exchange also did well in the early part of the year,” says Ritakallio.
Ilmarinen’s long-term investment return remained on a good level. The real return on investments since 1997 was 4.4 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.
“Pension investors target the best possible returns in the long run, which is why returns need to be examined over the course of as many years as possible. In my opinion, the clearly more than 4 per cent real return, since 1997, on pension assets managed by Ilmarinen is very good as several financial crises occurred during the period in question,” says Ritakallio.
Solvency capital already close to EUR 10 billion
Ilmarinen’s solvency strengthened clearly, equalling EUR 9.7 (7.2) billion at the end of March. This was 35.8 (28.2) per cent of the technical provisions and 2.6 times (1.9) the solvency limit.
“Our strong solvency protects our pension liabilities from market turbulence, also in a more challenging environment,” Ritakallio says.
Good share price performance anticipating rise in real economy?
Although the early part of the year has been an excellent one on the share markets, it is still too early to say, according to Ritakallio, whether this forecasts an improvement in the general economic situation in the near future.
“It remains to be seen whether the situation will genuinely improve for businesses during the course of this year. The truth is that good economic news has a positive effect on consumer behaviour and companies’ investment appetite, which would, of course, prove to be good for the economy,” he says.
Mikko Mursula, Ilmarinen’s Chief Investment Officer as of April, describes the investment outlook for the rest of the year as conflicted.
“There is a risk of strong fluctuations in share prices. With interest rates at zero, investors are still heading towards the equity markets although quite a long and severe rise in share prices lies behind us,” he says.
It is, however, at the current interest rate level, too early for talk of an actual equity bubble, according to Mursula.
“In a situation like this pension investors must carefully consider how much and what investment risks they are willing to maintain in their portfolios. We naturally monitor the situation daily,” he says.
Attachments: Ilmarinen Q1 2015
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 Pension policy, tel. +358 10 284 2599, +358 50 583 8599
Päivi Sihvola, Senior Vice President, Corporate Communications and Human Resources, tel. +358 10 284 3590, +358 040 757 4992