Last year was a rather good year for pension funds operating in Estonia: almost all pension funds recorded growth and the overall index grew by 11.1%. Passively managed pension funds, which invest in investment funds that replicate indices, have had particular success.
The most successful pension fund last year was the Swedbank pension fund index, which recorded a return of 20.7%. This is followed by the Swedbank index for those born in the period 1990-1999, the Tuleva stock index, the SEB index, the Luminor index with returns of the same order of magnitude.
The first non-indexed was the SEB 18+ pension fund, which increased investors’ investment by 15.7% in one year. Similar to index funds, which have grown largely due to the rapid rise in stock prices, the SEB 18+ also invests heavily in stocks and has therefore shown an above-average return.
Among index funds, the LHV index gave the lowest return. LHV fund manager Joel Kukemelk justified the fund’s lower return last year with greater diversification to reduce increased risks from the overrepresentation of some stocks in index funds.
Actively managed funds performed significantly worse than the indices last year. The average return of pension funds was created by only four – two Swedbank life cycle funds and funds investing in SEB and Luminor shares. In total, 16 out of 26 funds operating in Estonia were below average.
Lower yield funds were primarily characterized by a more conservative bond investment strategy. The lowest return was shown only by the Tuleva bond pension fund, which invests in funds that invest in bonds.
At least in part, pension funds that invest in bonds have also been affected by the depreciation in the value of bonds due to the higher interest rate environment, which has reduced returns.
The only fund that recorded a real decline compared to the previous year was the green investment pension fund LHV, which fell by 5.6% for the year. The fund manager attributed the decline to the high volatility of the fund’s return and also to people’s desire to abandon the fund due to last year’s 20% decline.
Fund performance
In addition to the good performance of index funds, they also found many new pension collectors over the course of the year. This happens precisely to the detriment of more actively managed funds.
Estonia’s active funds with the largest number of investors: the Swedbank pension fund for those born in the years 1970-79, those born in the years 1980-89 and the LHV L pension fund have collectively lost over 20,000 debt collectors in one year, while , for example, the four indices with the highest returns in one year increased the number of investors by almost 25,000 people.
Number of investors
In terms of volume, the volume of assets invested in Estonian pension funds last year increased by 24% to 4.95 billion euros. The largest funds at the end of the year were LHV L with 875.1 million euros and the Swedbank fund for those born in 1970-79 with 849.8 million euros.
The number of people using retirement investment accounts has also increased compared to a year ago, but their number remains modest. Less than one percent of all those who joined various pension funds.
The volume of pension funds at the end of the year
At the same time, the largest funds continue to be actively managed: in the case of LHV Li, investors pay 1.95% of the fund volume annually, and in the case of Swedbank’s 1970-79 fund 0.77% of the volume. Calculated in terms of volume at the end of the year, for example, 17.1 million euros per year for LHV Li and 6.5 million euros per year for Swedbank 1970-79,
Estonian pension fund fees continue to vary quite widely. From 0.31% per annum for Swedbank index funds to 1.95% per annum for LHV Li.
For example, if you look at the state in terms of fund volume at the end of last year, investors of Estonia’s largest pension fund spent 17.1 million euros on commissions. Using the same logic, the fees of all funds would amount to a total of €48.4 million considering the year-end volume. At the same time, 23.1 million euros would go to the commissions of LHV funds,
Pension fund fees
In total, Estonians invested 737.4 million euros in investment funds. The LHV L pension fund received the most, namely 105.2 million euros, while 100.7 million went to the Swedbank fund for those born in the period 1970-1979.
It is also possible to calculate the distribution of funds in terms of income, i.e. the statistical profile of the investor of the funds. For example, it appears that people with above-average incomes put money into retirement investment accounts, where you have to invest yourself.
Also, for example, investors in Tuleva and Luminor index funds tend to be wealthier. At the other end are pension funds aimed at young or older pension investors, as well as, for example, Swedbank’s index fund.
Contributions to the pension fund in 2023
2024-01-10 11:09:00
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