Varma reports positive yield for half of investments

Written by Michael Griffiths

28/10/2022

Varma has reported that half of its investments in the period between January and September generated positive returns.

The Finnish group stated that accelerated inflation as well as rising interest rates had been reflected in the results.

Its return on investments in the first nine months of the year was -4.9%, with the value of Varma’s investments sitting at €56.4bn, down from €59.0bn on 1 January.

Private equity investments yielded 13.5% (39.9%), hedge funds 5.6% (11.6%) and real-estate investments 5.55 (4.15) per cent, which Varma said had compensated for the return on listed equities, which was -19.3% (17.6%).

Varma president and CEO, Risto Murto, said: “In Europe, bleak signs for the economic outlook are caused especially by the energy crisis and the ongoing war in Ukraine. However, the investment market is driven by the US, where the economic issues are more straightforward and the war is more distant. Of Varma’s entire investment portfolio, 49% continued to generate positive returns.

“The investment environment continues to be unstable, and no immediate encouraging signs are in sight. The biggest concern that has emerged in the autumn is the possibility of a recession. The investment markets are now pricing the effect of high interest rates on companies’ financial performance.”

Chief investment officer, Markus Aho, added: “As a result of rising inflation and central banks’ interest rate hikes, market movements have been steep, as expected.

“Diversification across asset classes and geographical areas as well as investments in unlisted companies helped secure investments against the worst turmoil. We have temporarily reduced the weight of listed equities, and our investment allocation secures solvency.”

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