The return on investment of the State Pension Fund (VER) for the period from January 1 to March 31, 2011 was 0.5%, while the return on investment for the entire year 2010 was 11.7%.
The market value of VER's investments was 13.9 billion (13.9 billion on December 31, 2010). VER's investments comprised 54.2% (54.3%) in fixed income investments, 39.9% (40.4%) in equities, and 5.9% (5.2%) in other investments.
The VER investments performed acceptably in the first three months of 2011. In comparison to the benchmark indices, excess earnings were secured in fixed income and stock investments, even though the return from these investment types remained slightly negative. Return on other investments was 0.9%.
"In the beginning of the year, the crises in Japan and Northern Africa reflected on the investment market. However, the effect of these crises seems to be short-term. Due to the low interest rates, economic growth seems to remain at a good level," says Timo Löyttyniemi, Managing Director of VER.
The geometric mean of VER's five-year return was 2.8%, while the geometric mean for VER's 10-year return was 5.3%.
The estimated pension contribution return for the period January to March is approximately 391 million, which corresponds to the figures for 2010.
A total of 387 million of VER assets had been transferred to the State budget by the end of March. The corresponding figure for the period January 1 to March 31, 2010 was 366 million.
Despite the geopolitical uncertainties and the debt crisis, the recovery of the global economy continued in the beginning of the year. The global market prices of raw materials increased strongly as a result of the strong growth of the emerging economies, which boosted inflation all over the world. Monetary policies were tightened in the developing countries as well, as the increase of raw material prices was strongly reflected also in the price of other commodities. The effect of the monetary and financial policy support is gradually starting to taper also in the developed countries. The short-term prospects of the global economy are very favorable. Solving the various deficit problems in the global economy are necessary in order to achieve good long-term economic growth.
Fixed income investments
The return on fixed income investments was 0.4%, while the return on investment for the entire year 2010 was 3.9%.
Fixed income return from January to March was negative. The interest rates fluctuated in the beginning of the year, although there was very little variation. The direction of the development, however, was ascending. The difference of the interest rates of the Spanish and Italian government loans in relation to the German government loans decreased significantly, as the trust of the market toward these countries increased. High-yield and emerging market bonds yielded the highest returns in the beginning of the year. VER increased its investments in the emerging loan markets.
Quoted equity investments
The return on equity investments was 0.8%, while the return on equity investments for the entire year 2010 was 23.6%.
The first quarter of 2011 was rather nervous on the stock market. From the perspective of the stock market, there were exceptionally many uncertainty factors. The price of oil started a steep increase in the middle of February due to the events in Northern Africa and some Arab countries. The effects of the earthquake and the consequent tsunami in Japan caused more insecurity in March, making the already rather nervous market even more jittery. At the end of the quarter, the return of VER's equity portfolio remained slightly negative.
Return on other investments was 0.9%. The return on investment for the entire year 2010 was 8.6%.
In terms of other investments, the year has had a brisk start. For private equity and real estate investments, the market situation was more optimistic than the situation at the same time last year. The returns on other investment t