Investment Allocation, Realized Returns and Solvency Ratios
The Finnish pension investment assets amounted to EUR 188.5 billion at year-end 2016. The private sector accounted for EUR 117.9 billion. The investment portfolios of the various actors grew evenly throughout the year.
Of private sector investments at year-end 2016, approximately EUR 33.2 billion, close to 30 per cent, were in Finnish objects, nearly 20 per cent in other countries in the euro zone and over 50 per cent elsewhere. Countries outside the euro zone include the other Nordic countries, Great Britain, Switzerland and the United States, in addition to countries of the so-called developing markets.
Further statistical information on asset allocation per investment type and area is available at the website of the Finnish Pension Alliance TELA.
Return on investments
In the long term, there is no great fluctuation in the realised return for different types of investments. The annual nominal average return of interest-bearing investments and investments in shares and share-like instruments has been more than four per cent. Investments in real estate have yielded an annual return of slightly less than six per cent.
Private-sector investment allocations come with lower risks, which means that the return fluctuation is also smaller than in the public sector. Most likely, solvency regulations lie behind the lower risk. There are no such regulations in the public sector.
When reviewing per type of pension provider, the solvency ratio has varied between 15 and 41 per cent during the last decade. The riskiness of investments and, hence, the solvency limit have changed in the same direction as the solvency ratio. The solvency limit is a demand relating to the supervision of earnings-related pension providers. If the limit is not met, supervisory measures will be launched.
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