Varma Mutual Pension Co., Helsinki, returned 2.8% and recorded a 3% increase in assets to €50.2 billion ($61.7 billion) in 2020, despite negative investment returns in the first three quarters of the year due to the coronavirus pandemic.
The investment return was equivalent to a €1.4 billion gain. The gain for the year was bolstered by a 5.6% return generated in the final quarter, an update said Friday. The fund returned -2.6% for the first nine months of the year.
In 2019 the fund returned 12%, which was equivalent to €5.2 billion.
"Despite the dire COVID-19 pandemic, Varma's pension assets increased; our pension assets have never been higher than they are now. Especially important for the real economy and investment markets were the rapidly initiated strong stimulus measures," Risto Murto, president and CEO of Varma, said in a news release accompanying the update.
Unlisted equity had the highest return in 2020 at 8.6%, compared to 16.9% in 2019.
Private equity investments returned 7.8% and were lower than in 2019 at 15.1%. Government bonds, added 6.1% to Varma's portfolio, compared to adding 2.6% a year earlier. The return on all fixed-income investments — including government bonds — was 1.9% in 2020 compared to 4.5% a year earlier. Real estate returned 2% down from 4.1% in 2019.
Other investments such as commodities and hedge funds lost 2% in 2020, following a 4.5% gain in 2019. Varma said that, within that return, hedge funds accounted for a 1% loss. In 2019 hedge funds returned 5%.
Listed equities returned 5.2% in 2020, compared to 25.4% in 2019.
"Following the plunge in share prices in the spring, few people believed that investment returns would be back in positive territory at year-end. In addition to equity investments, credit-risk-bearing asset classes, such as hedge funds, yielded positive returns towards the end of the year," Reima Rytsola, CIO of Varma, said in the release.
"So far, the investment market has not reacted to the delays in vaccine deliveries or the news on the virus variants. The rollout of the global vaccine program would have to be swift for the investment market's valuation levels to be in line with the real economy outlook," Mr. Rytsola said.
The carbon footprint of Varma's €17.9 billion listed equity investments reduced by 29% in five years, the update said. Carbon emissions from corporate bond and real estate investments declined 23% and 47%, respectively, compared to 2015.
Varma invests 74% of its assets internationally and 26% domestically. By asset class, the approximate weightings are 47% listed equities, 27% real estate, 11% bonds and loans and 11% money market funds. The remaining 3% is invested in private equity.