Varma - Annual Report 2012

Consistent return on other investments

Other investments accounted for 16 (14) per cent of Varma's portfolio. They consist of hedge funds (11 per cent), inflation-linked investments (5 per cent) and a relatively small commodities position. The return on other investments was 6.0 (4.5) per cent.

Varma's return on hedge-fund investments stood at 6.8 (3.5) per cent, which clearly surpassed the performance of hedge-fund indices. They performed consistently with only minor fluctuations. Hedge-fund investments are almost entirely US-dollar denominated. Changes in euro exchange rates somewhat diminished the return; the return on hedge funds, excluding the impact of currency exchange rates, was 8.1 per cent.

Inflation-linked investments include inflation-linked bonds issued by states with good creditworthiness. Their return was 6.0 (10.9) per cent. The return was affected by the decline in real interest rates, and by the inflation rate remaining at a higher level than the interest-rate level.

The asset class of other investments provided, on the whole, return and diversification benefits during the year at a low risk level.