LHV pension funds supremacy crumbling

Tõnis Oja
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«In saving for retirement, it’s the result that matters!» sounds the LHV pension funds slogan – up to now, quite fitting, as for years the LHV bank pensions funds yields have proven the best. As a result, they have bitten off a decent piece of market share. Should last year’s trend continue, however, they’ll have to find themselves a new slogan, as according to results i.e. yields of fund units LHV funds ought to be replaced by some others.

No longer do the LHV rates of return tower above the pension funds of others. Among the second pillar conservative funds, Danske Bank has taken the lead. In the aggressive strategy category and third pillar pension funds, Nordea is offering the largest yields.

When it comes to the best pension fund so far – the LHV Pension Fund L – its last year’s yield amounted to four per cent; amongst progressive strategy funds, this only awarded them fourth place. 

Pension funds are super long term investments (for older fund units owners, merely long term), wherefore no big conclusions should be drawn from one year’s yields. It still does feel like the markets are playing a little trick on the strategy employed by our best fund manager Andres Viisemann, of LHV pensions funds chief.

Namely, over the last three-four years, LHV has invested into the Baltic, especially Estonian stock market. While European and US stock markets did a decent rise, last year, that of the Tallinn exchange remained rather subdued.

The other reason for LHV pension funds lacklustre results was Mr Viisemann’s conservativeness, wherefore over a third of second pillar investments fund money is kept in bank deposits. As at November 30th, the smallest percentage of money was found in pension fund XL (37.1 per cent), the largest in pension fund M (43.9 per cent).

As said, it is a bit early to consider LHV dethroned; even so, the aspirant would be Nordea.

«The results speak for themselves – according to pensionikeskus.ee, the top yielding 2nd pillar pension fund of 2013 was Nordea’s A Pluss, and the best among 3rd pillar – Norea’s  Aktsiad 100,» said Angelika Tagel, head of Nordea Pensions Estonia.

«We are rejoicing together with our clients,» said Ms Tagel, adding that, over a year, Nordea pensions funds assets volume increased by 40.5 per cent. 

According to Swedbank’s Investments Fund fund manager Katrin Rahe, 2013 stood out by extreme variety of factors impacting productivity of funds. «Almost every month, risk appetite either grew for sunk on financial markets,» said Ms Rahe. «As opposed to 2012, prices of various financial asset classes no longer moved hand in hand – far from that.»

Fund managers are expecting last year trends to continue in 2014. «We expect the new year to bring continued increase of growth of global economy, and that the economic cycle of eurozone – showings signs of recovery – would establish itself in a manner more sustainable,» said Ms Rahe.

«During 2014, we expect modest stock market growth. There are still some supporting arguments for stock markets in the new year, even though the yields of developed market regions will hardly be able to repeat last year[‘s result],» she added.

According to Angelika Tagel, economic indicators of US and Europe are better and that might have a positive impact on developing markets as well – the latter, in the last couple of years, performing considerably worse than developed markets. 

As underlined by Ms Rahe and Ms Tagel alike, bond funds will struggle giving good yields in the new year as well. 

The best yields of conservative pension funds investing in bonds alone remained under one per cent. Investors of two bonds funds – Nordea’s Pension Fund C and SEB Konservatiivne – lost money.

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