Finnish earnings-related pension provider, Elo, has generated a return of 9.4 per cent in the first three quarters of 2021, it has revealed.

Publishing an update, the provider revealed that its assets increased by €2.4bn between January and September, bringing the market value of investments to €28.3bn at the end of September. The solvency ratio was 126.9 per cent and the solvency capital was 1.6 times the solvency limit.

Elo CEO, Carl Pettersson, who took up the position on 7 October, said: “The economic environment has been characterised by substantially higher inflation and strong economic recovery. The Finnish economy has also started to recover fairly quickly from the downturn caused by Covid-19, which has been reflected in higher payroll figures reported by our customers.

“I’m pleased to start developing this company from a solid foundation. Elo’s investments have generated good returns, solvency has improved and customer satisfaction is excellent. The development of Elo’s governance, which is being assessed by the Financial Supervisory Authority, and the clarification of the management system and risk management are proceeding as planned and on schedule.

Elo highlighted private equity as an asset class that performed particularly well this year. Elo chief investment officer, Hanna Hiidenpalo, said: “The performance of private equity funds has remained particularly strong this year. Strong equity market has increased M&A activity. The portfolio companies have shown a positive profit performance compared to last year.”

In addition, activity in the real estate investment market has picked up; its main focus of real estate investments was on ongoing commercial and residential construction projects. During the review period, 95 new apartments were completed and approximately 300 apartments are under construction or renovation.

In developed Western countries, fixed-income markets stabilised after high volatility in the early part of the year. Corporate bond investments generated positive returns due to the low number of corporate bankruptcies globally as well as lower loan margins particularly in higher-risk corporate bonds. The hedge fund portfolio generated fairly good returns in the third quarter, but the returns were substantially more moderate than earlier in the year.

At the end of September, the average 10-year nominal return of Elo’s investments was 6.7 per cent and the average 10-year real return was 5.6 per cent. The average 5-year nominal return was 6.6 per cent and the average 5-year real return was 5.5 per cent. The result of investment operations at fair values was €999.7m. The highest returns during the review period were achieved in private equity investments at 30.7 (2.4) per cent, unlisted equities at 16.6 (6.5) per cent and listed equities at 14.1 (-6.6) per cent.

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