“The first half of the year has been rich in both political and economic events. Concerns about the increase in China’s economic growth were replaced by the refugee crisis in Europe, whereas in the end of June we were surprised by events in Great Britain, causing a great impact throughout the world. Naturally such events also intensify nervousness in global financial markets by having negative effects on investment assets with higher risk and profit potential – mainly company shares,” comments Iļja Arefjevs, Member of the Board of Nordea Pensions Latvia.
Nevertheless, for customers of conservative investment plans the first half of the year has ensured outstanding performance under low interest rate conditions – the yields of these plans over the period experienced fluctuations from 0.5% to 2.7%. The law stipulates that in the Latvian pension Level 2 the maximum investments in corporate shares cannot exceed 50% of the total investments, therefore the remaining funds should be channelled into more conservative investment forms. As a result, exactly the conservative investment forms – government bonds and investment grade corporate bonds – have been the largest beneficiaries of the uncertainty prevailing in the financial markets.
With the European Central Bank continuing to buy government and corporate bonds for 80 billion euros per month (before the ECB corporate bond-purchasing program (Corporate Sector Purchase Programme), the ECB monthly purchase asset value was 60 billion euros), the growth in the value of secure investments in the second half of the year cannot be excluded, which in annual terms can provide excellent performance for customers of conservative plans.
In terms of active investment plans, although mostly the performance of the first half of the year was moderately negative, current trends suggest that this year could end with a neutral or moderately positive result.
Nordea Pensions Latvia manages two Level 2 pension plans - Nordea Conservative Investment Plan and Nordea Active Investment Plan, as well as two Level 3 pension investment plans - Nordea Balanced Pension Plan and Nordea Progressive Pension Plan. The total funds of the Nordea investment and pension plans amounts to 141 million euros.
Yields of Nordea Investment and Pension Plans*:
*The current yield does not guarantee equal yields in the future
**On average per year