Q1 performance and total assets

Looking at the recent quarterly statements from the Finnish pension funds, Q1 was not that successful and Q2 is turning out to be even worse. Average return under 1 per cent and total investment assets at somewhere around €130 billion. While the return was dismal, the amount of assets do give some comfort. At 130 billion they are close to Finland’s gross domestic product, which essentially means Finland will never lose AAA credit rating.

Nokia losses

The table above is from Nokia’s 2010 financial statement notes and details the largest registered shareholders at the end of 2010. Among the 10 largest shareholders we have 5 Finnish pension funds who collectively hold 117 393 000 shares. I am sure that the remaining pension funds, Tapiola, Keva and Veritas also hold significant stakes in Nokia, but this is bad enough.

At that time, Nokia was trading at around €8.3 a share, 4 euros higher than today. That translates into €500 million in Nokia related losses for this year assuming no significant changes in ownership. If we look at just Q2, the losses are currently at around €250 million. Looking at the broader decline in the equity market that I believe is going to be extended, it is looking like a pretty bad quarter for Finnish pension funds.

Moreover, I hope this is enough to dampen the calls for Finnish pension funds to invest heavily into Finland, because we would discussing pension cuts now if that would have happened few years ago. Pension assets need to invested based on the best risk-adjusted return, not based on nationality.