Top return on equity investments

Equity investments yielded very good returns and had the strongest performance of all asset classes. They accounted for 39 (34) per cent of Varma's investment assets and yielded a return of 21.8 (14.5) per cent. Equity investments consisted of listed equities (31%), private equity investments (6%) and unlisted equities (3%). Equity investments have had a very strong five-year period, with an average return of 14.2 per cent in 2009–2013.

Record rise in share prices

The return trend of listed equities was very good. The return was generated by developed markets, especially the U.S, and Finnish equities also generated a strong return. Share prices climbed during the year, and listed companies paid high dividends. On the other hand, returns from emerging markets remained slightly negative.

The return on Varma’s listed equities amounted to 23.7 (14.8) per cent. Finnish listed equities yielded the strongest returns in the equity portfolio, at 33.7 (21.3) per cent, and U.S. equities showed a similar increase, to 31.8 (14.9) per cent. The performance of Sampo Corporation, Varma’s largest holding, was especially strong, with an annual return of 55.8 per cent.

Share prices rose steadily throughout the year, with the exception of a temporary downswing in June. Market confidence recovered quickly, however, and the rest of the year was very strong. The U.S. stock markets drove share price increases during the year.

From an economic perspective, the outlook for the equity markets is challenging. The U.S. economy picked up and interest rates remained low, which promoted an increase in share prices. Share prices, however, reflect high hopes of improvement in companies’ results. They are very sensitive even to the slightest decline in return expectations or increase in interest rates.

Finnish equities accounted for 46 per cent of Varma’s listed equities at the end of the year. European equities accounted for 24 per cent, U.S. equities for 19 per cent and other areas for 11 per cent of all equities. To counterbalance the high share of domestic equities, Varma has broadly diversified its portfolio outside of Finland, not only in international equities, but also in private equity investments, hedge funds and corporate bonds.

Good return on private equity investments and unlisted equities

Private equity investments and unlisted equities also generated good returns. Private equity investments yielded a return of 12.1 (13.0) and unlisted equities 26.7 (15.5) per cent.

Close to half of Varma’s private equity investments are invested in the U.S., and the rest mainly in Europe and the Nordic countries. The value of these investments developed strongly in all areas. The rise in share prices and the positive financial performance of private equity funds’ portfolio companies translated into good returns. Private equity funds made use of the strong demand and liquidated large amounts of their investments. On the other hand, the volume of new investments was fairly low and the total volume of investments decreased somewhat. Activity in the U.S. financial and acquisition markets was brisk, resulting in major capital distributions.

Unlisted equities include Varma’s holdings in the housing real-estate companies SATO Corporation and VVO Group, and in the forestry company Tornator Oyj. All three companies developed very favourably due to dividends distributed and an increase in value.

Private equity and unlisted equities are a long-term asset class, and their long-term return has been very good.



15 largest equity investments, holding
holding of
€ mill.shares, %
Sampo plc1,5687.85
Nokia Corporation4972.28
Nordea Bank AB3890.99
Wärtsilä Corporation3675.20
SATO Corporation34045.67
Nokian Tyres plc3146.75
Elisa Corporation1785.58
KONE Corporation1701.07
UPM-Kymmene Corporation1422.19
Amer Sports Corporation1256.99
Kemira Oyj1156.09
Stora Enso Oyj1141.99
Sponda Plc9910.27
Metso Corporation901.93
YIT Corporation866.63