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Hedge Funds Show Resilience in Elo and Veritas Portfolios

Report: Systematic Strategies

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Stockholm (HedgeNordic) – Elo and Veritas, the third and fourth-largest pension insurance companies in Finland, released their financial results for the third quarter of 2023. The value of their investment portfolios edged down by 0.1 percent or 0.2 percent, respectively, in the third quarter. Both Elo and Veritas rounded off the initial three quarters of 2023 in positive territory, with returns between 2.0 and 3.0 percent. Notably, the hedge fund portfolios of both Elo and Veritas contributed to returns both in the more challenging third quarter of 2023 and the entire first three quarters of the year. Elo’s hedge fund investments yielded a return return of 4.3 percent, while Veritas saw a 2.1 percent return from its hedge fund allocation.

Elo, the third-largest of the four pension insurance companies in Finland, disclosed an overall return on investment of 2.7 percent for the first nine months of 2023. This return came despite a slight dip of 0.1 percent during the third quarter. “Equity markets and fixed income markets both generated weak returns in the third quarter,” according to Elo’s CEO Carl Pettersson, largely due to fears of continued tight monetary policy.

“Equity markets and fixed income markets both generated weak returns in the third quarter…”

Elo’s return on equity investments over the first three quarters of 2023 reached 4.0 percent, reflecting a 4.5 percent return for listed equities and a 3.8 percent return for private equity investments. Notably, equity market returns showed significant geographical divergence. While equity markets in the United States and Japan delivered solid returns, Finland and China reported negative year-to-date returns by a considerable margin. 

Elo’s hedge fund portfolio, accounting for 9.7 percent of the broader portfolio at the end of September, returned 4.3 percent during the first three quarters of 2023. This allocation claimed the third-highest percentage return in Elo’s portfolio, following loans and listed equity investments. During the first half of 2023, the portfolio generated a 2.6 percent return, building upon the 2.3 percent return from 2022. The value of Elo’s hedge fund portfolio increased from €2.6 billion at the end of last year to its current value of €2.8 billion by the end of the third quarter.

Veritas, the smallest of the four pension insurers, reported a return on investments of 2.3 percent for the first three quarters of 2023, despite a 0.2 percent dip in the third quarter. Similarly to Elo, Veritas experienced a drag on returns from its equity investments during the third quarter. “The beginning of the year was positive for the equity market, but the rise in interest rates during the last few months has weighed on equities,” says Kari Vatanen, Chief Investment Officer at Veritas. “The Finnish equity market is, however, a whole different story. The general index for the Helsinki Stock Exchange has declined 25 percent from the previous index peak.”

“The beginning of the year was positive for the equity market, but the rise in interest rates during the last few months has weighed on equities.”

Following a marginal decrease of 0.3 percent over the first six months of 2023, the hedge fund portfolio of Veritas enjoyed a solid third quarter, bringing the year-to-date return for the portfolio to 2.1 percent. At the end of the third quarter, Veritas had €459 million or 10.8 percent of its €4.3 billion portfolio allocated to hedge funds, compared to €337 million or 8.1 percent at the end of 2022. Veritas’ hedge fund portfolio returned a more impressive 12.3 percent in 2022.

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Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

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