Keva sees return of -10.4% in Q1 2020

The Finnish pension provider for the local government sector, Keva, had a return of -10.4 per cent in the first quarter (Q1) of 2020, it has revealed.

At the end of March, Keva’s investments had a market value of €50.2bn compared to €52.5bn a year earlier. Keva CIO, Ari Huotari, said it was the coronavirus that triggered a strong stock market correction.

”Support measures by central banks and other public actors halted the strongest fall at this stage and markets have recovered somewhat since the worst stage,” he explained. “All the same, in the current situation the outlook for the global economy in the next few years is quite gloomy and there are still no reliable estimates of the follow-up costs after the coronavirus pandemic. The capital markets have likely only seen the first episode in this story.”

Private equity investments generated 3.2 per cent and real estate investments (including real estate funds) generated 1.4 per cent. However, the return on other investment types at market value was in negative territory: -22.0 per cent on listed equities, -5.7 per cent on fixed-income investments and -3.0 per cent on hedge funds.

Despite suffering during Q1, Keva said its long-term return on investments is at a good level. The capital-weighted annual cumulative real return on investments since the inception of funding in 1988 until the end of the report period is 3.6 per cent.

The non-capital-weighted average real return for the same period is 5.1 per cent. The nominal return for the past five years without capital weighting has been 1.4 per cent and the real return for the past ten years 3.8 per cent.

Fixed income investments (including the impact of derivatives) account for 38.5 per cent and listed equities and equity funds for 34.3 per cent of Keva’s entire investment portfolio. Of the smaller asset classes, private equity investments account for 12.3 per cent, hedge funds for 7.7 per cent and real estate investments for 7.1 per cent of the portfolio.

In regards to how the provider has adapted its working processes as a result of the coronavirus pandemic, Keva CEO, Timo Kietäväinen, believes it has been successful with employees now working from home.

”Pension payment and processing, services for insured employers and employees as well as other services are functioning well remotely. New services suited to emergency conditions have also been developed,” he said.

He added that its priority in relation to investment operations has been its “capacity to successfully ensure Keva’s liquidity”.

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