Stockholm (HedgeNordic) – Finnish pension fund Varma earned 13.5 percent on its investments during the nine-month period ending September, with private equity investments yielding nearly 40 percent and hedge funds more than 11 percent. Varma had €9.09 billion, or 16 percent, of its €56.6 billion-investment portfolio allocated to hedge funds at the end of September and €8.08 billion allocated to private equity.
The return on Varma’s investments during the first nine months of 2021 reached 13.5 percent to add €6.7 billion in asset gains. The value of its investment portfolio grew to €56.6 billion at the end of September from €48.1 billion at the end of last year. Varma’s investments in private equity generated the highest returns at 39.9 percent, followed by listed equities at 17.6 percent and hedge funds at 11.6 percent. The return on real estate investments amounted to 4.1 percent.
“Equities were the drivers of Varma’s investment returns during the review period, with private equity investments showing the strongest performance. The return on hedge funds also increased considerably.”
“Equities were the drivers of Varma’s investment returns during the review period, with private equity investments showing the strongest performance,” writes the Varma team in its interim report. “The return on hedge funds also increased considerably. The rise in interest rates kept the return on fixed-income investments modest,” the interim report adds. “Although the rally in the listed equity markets levelled out, our investments continued to perform strongly in the third quarter,” comments Varma’s CIO Reima Rytsölä (pictured). “All asset classes yielded consistent returns, and private equity investments performed exceptionally well.”
“All asset classes yielded consistent returns, and private equity investments performed exceptionally well.”
According to Rytsölä, there are two divergent forces driving the investment markets at the moment. “The lifting of coronavirus restrictions globally supports economic growth. On the other hand, production bottlenecks and rising energy prices are slowing down growth worldwide,” says Rytsölä. “Inflation is rising, and the markets are monitoring whether this is a temporary phenomenon and how the central banks will adjust their monetary policy in an environment of rising prices.”
Varma Promotes Sustainability Among Hedge Funds
“Thanks to Varma’s engagement efforts, approximately 95 percent of Varma’s hedge fund investments have responsible investment policies in place.”
In early October, Varma announced it had joined the UN Global Compact, the world’s largest corporate sustainability initiative. In its efforts to promote sustainability, Varma has also been pushing its hedge fund investments to embrace sustainability. “Thanks to Varma’s engagement efforts, approximately 95 percent of Varma’s hedge fund investments have responsible investment policies in place, and a climate risk assessment is being conducted on them,” writes Varma. “In addition, in 2021, Varma made significant new fund commitments in renewable energy and funds focussing on the energy transition.”