LHV PIK portfolios have grown to more than EUR 125 million

LHV’s pension investment account, or PIK, allows second-pillar pension savers to decide for themselves which securities to invest their pension assets in. Broad-based index funds and well-known technology companies continue to dominate LHV clients’ portfolios, but another trend has become increasingly visible since spring – a larger share of pension assets has been invested in securities.

By mid-October, the total value of LHV PIK portfolios had reached approximately EUR 125 million, compared with just over EUR 100 million in April. Over six months, the total value therefore increased by nearly EUR 25 million, or 24.6%.

At the same time, the value of securities rose from EUR 82 million in mid-April to nearly EUR 108 million, while the amount of cash declined slightly. As a result, the share of cash in total PIK assets fell from close to 19% to around 14%. In other words, the growth in portfolio value has also been accompanied by a higher proportion of pension assets being invested.

Source: LHV

Index funds form the foundation, technology adds focus

The largest positions in LHV PIK portfolios reveal a combination of two investment approaches. Broad-based index funds are used as the foundation of portfolios, while individual stocks provide additional exposure primarily to the US technology sector.

The prominent position of S&P 500 and NASDAQ-100 funds indicates that investors prefer to link a significant share of their pension assets to the performance of the broader market rather than to individual companies. At the same time, NVIDIA, Microsoft, Alphabet, Tesla and Apple are all among the ten largest investments, meaning that the technology sector also has a significant influence on portfolios outside of index funds.

LHV Group stands out separately as the only Baltic individual stock to remain among the largest positions. Its share has nevertheless decreased compared with spring. There have also been changes among US technology companies: Apple has entered the top ten, while Amazon has dropped out.

The continued presence of Bitcoin Tracker Euro among the largest positions also shows that some PIK users complement their long-term pension portfolios with instruments outside traditional equities and index funds.

The ten largest positions together account for 28.3% of the total value of LHV PIK portfolios, compared with approximately 29% in spring. Concentration among the largest holdings has therefore decreased slightly, while investors’ main preferences have remained broadly unchanged.

Source: LHV

A smaller cash position allows more assets to participate in market movements

For PIK investors, long-term performance depends not only on the choice of investments, but also on how quickly money credited to the account is invested in securities. A lower share of cash means that a larger proportion of pension assets held in LHV PIK accounts is directly exposed to movements in financial markets.

The increase in the value of securities does not, of course, reflect new purchases alone. Regular second-pillar contributions and changes in the market value of existing investments also play a role. The changing portfolio structure nevertheless shows that, compared with spring, a smaller proportion of pension assets is being kept uninvested.

PIK performance has improved considerably

Alongside rising equity markets, the aggregate performance of PIK portfolios has also improved significantly over the past six months. By mid-October, LHV PIK portfolios had gained 35.4% since the start of the measurement period, while the EPI main index had risen by 50.2%. The gap therefore stood at 14.8 percentage points.

In mid-April, the corresponding figures were approximately 16% and 30.6%. Both have advanced at almost the same pace over the following six months, meaning that the previous underperformance of PIK portfolios relative to the overall pension fund index has not widened significantly in recent months.

One factor that has affected longer-term performance has been the relatively large cash position. In a rising market, uninvested cash does not participate in gains in securities prices, which can weigh on the performance of the overall portfolio. The decline in the share of cash in recent months means that this effect has become smaller.

Source: LHV, Estonian Funded Pension Registry

This article is for informational purposes only and should not be construed as investment analysis or a recommendation to buy or sell the securities mentioned. LHV is not liable for any decisions made based on this information.
Investing involves both opportunities and risks; the market value of securities may rise or fall. In foreign markets, returns may be affected by fluctuations in exchange rates.
The past or future performance of the securities and financial indices discussed above does not constitute a promise or indication of future performance.