The return on investment of the State Pension Fund (VER) for the period from January 1 to March 31, 2012 was 5.4%, while the corresponding figure for the whole of 2011 was -2.3%. 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 market value of VER's investments was 14.5 billion at the end of March (13.7 billion on December 31, 2011). VER investments comprised fixed income investments of 54.9% (56.6%), equities of 38.1% (36.4%), and other investments of 7.0% (6.9%).
The return on fixed-income investments was 2.7% and the return on stock investments was 10.8%. Other investments reached a 0.4% return.
"The returns on VER's investments were good. The beginning of the year went very well in the markets. Stock markets rose sharply and interest rates remained low. After such a strong rise in the stock market, the main focus for the rest of the year will be the continuation of economic growth both in Europe and globally," says Managing Director Timo Löyttyniemi.
The estimated pension contributions for the period January to March is approximately 389 million, which corresponds to the figures for 2011.
A total of 411 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, 2011 was 387 million.
Prospects for the global economy brightened during the first months of 2012. The Eurozone debt crisis also breathed a sigh of relief. This was thanks to the ECB's two massive financing operations, which brought over 1,000 billion of three-year funding at a 1% interest rate.
This development was also supported by improving economic data, the subduing of the threat of imminent Greek insolvency along with second bailout package granted for the country.
This favorable process was cut short in the latter half of March, however, when economic data turned out weaker than expected. At the same time, the Spanish government finances were revealed to be weaker than assumed.
Fixed income investments
The return on fixed income investments was 2.7%, while the corresponding figure for the whole of 2011 was 4.1%.
The return on fixed income investments was good in the first quarter. This was evident especially in the returns on the emerging market government bonds and the corporate bond portfolio. Returns from government bonds remained modest due to the low interest rate. High yield and emerging market bonds yielded the highest returns over the period under review.
Quoted equity investments
The return on equity investments was 10.8%, while the corresponding figure for the whole of 2011 was -12.3%.
The stock market showed an upward trend in the first quarter of 2012. The market sentiment showed clear signs of improvement during this quarter compared to the previous year. The ECB financing operation for banks was especially well received in the stock market.
Concerns remained the same as before, that is, the market is still worried about the financial situation of Southern European countries. VER's Nordic and emerging markets equity investments yielded the highest returns.
Return on other investments was 0.4%, while the corresponding figure for the whole of 2011 was 6.1%.
In other investments, the returns during the first quarter were quite modest, mainly attributing cash flows in and out of the portfolios. However, returns remained positive apart from investments in real estate funds. The improvement of overall market conditions served as the background for positive returns on absolute return funds.