25.02.2026
LHV’s active management is unique in Estonia’s pension fund market. For us, this means continuously analysing the economy and financial markets to identify attractive investment opportunities and select the best assets. In this interview, LHV portfolio manager Kaius Kiivramees takes us behind the scenes of Estonia’s largest investment team and explains how LHV’s actively managed funds consistently navigate different economic cycles with skill.
Let’s first look back briefly at 2025, when LHV’s actively managed funds delivered the strongest growth in Estonians’ second-pillar pension savings. Which strategic decisions laid the foundation for such a successful year?
Last year clearly confirmed that in volatile times, actively managed funds can often protect people’s pension assets more effectively. As a portfolio manager, I rely on facts, which means diving deep into data. Long-term history shows that there are periods when indices perform very well for years on end, but also extended downturns when index funds suffer significant losses.
For LHV, active fund management primarily means diversification and continuous risk management. We include investments from different asset classes in our portfolios and run through various risk scenarios on a daily basis before making investment decisions. This strategy has helped us successfully navigate market and economic turbulence for decades. For example, last year we effectively hedged dollar risk at a time when many investors were hit hard by the weakening dollar. Funds that do not continuously manage risk cannot create this kind of value for their customers.
Active management also allows us to move into compelling investments with strong long-term return potential. In the age of AI, investors should consider which things in the world are essentially irreplaceable. I recently attended a conference in Oslo, where one speaker aptly said that ‘scarcity defines value’. At LHV Varahaldus, we have long built our portfolios around a similar principle. Our focus is on risk management, meaning we actively look for investments that protect purchasing power across different economic environments. This approach has led us to investments where real-economy supply and demand dynamics work in our favour. At the moment, everything related to minerals and broader natural resources is on our radar and represented in our portfolios. AI cannot replace them.
At the same time, the wave of de-globalisation has created a situation where major powers are trying, by any means necessary, to secure future access to resources. Today, nearly half of the equity portfolios of LHV’s actively managed pension funds are linked in one way or another to minerals and broader resource themes. Turbulent times create interesting and attractive investment opportunities, and recently we have seen several of these emerge. We know how to take advantage of market turbulence, as demonstrated by our funds’ results across different economic cycles.
What changes are you planning to make in LHV’s actively managed funds this year? What moves will you make to generate rates of return for LHV’s customers?
Since flexibility remains essential, our strategy itself will not change. The environment is highly dynamic, and we must constantly monitor and analyse the opportunities it presents.
This year has started very well for LHV’s actively managed funds. It shows that global trends do not change with the turn of the calendar. We will continue investing in areas where we see durable trends. We believe the investments in our portfolios have been made at very reasonable price levels, while also maintaining sufficient diversification.
For example, we had a strong run with gold and took a fair amount of profit off the table last year. However, at the end of January, the precious metals sector experienced a significant sell-off, which we seized upon as an opportunity to buy back positions at much better prices. In our view, gold mining companies are still not expensive, and market volatility provides good opportunities.
Although we do not foresee fundamental strategic changes in 2026, it is worth emphasising the liquidity of our portfolio. We have the ability to move easily and quickly between different positions. Such a portfolio structure ensures that we can remain flexible even in challenging economic conditions and support the long-term financial security of our customers.
The goal of LHV Varahaldus is to identify investments where a changing environment creates opportunities. Places where we see that the balance between supply and demand has shifted.
Active fund management may sound like life on Wall Street, with rooms full of people constantly trading stocks under flashing red and green lights. What is everyday life really like in LHV’s largest investment team in Estonia?
We typically invest with the expectation of earning a 50% rate of return on equity investments over three years. Pension capital is long-term capital, and our greatest competitive advantage is our time horizon. It is a privilege to stay invested for three to four years without being forced out prematurely. When searching for investments, we do extensive groundwork. We visit companies on-site, communicate with entrepreneurs, conduct in-depth company analysis, and try to understand the people working within them. At the end of the day, companies consist of people striving toward a common goal. It is important to us that a company’s workforce is made up of motivated and capable individuals.
The majority of LHV’s investment team’s time is spent on analysis. Our buying and selling activities certainly do not involve constant daily trading. However, our work is highly engaging, because metaphorically speaking, there is always a large puzzle in front of us that needs to be solved in order to generate solid rates of return for LHV’s customers.
What are the fundamental principles you follow when making decisions in active management?
We are paranoid risk managers. We do not blindly throw money into the market; we want to understand risks as precisely as possible. This means mapping out different risk scenarios. This has a strong impact on the entire investment process, because by identifying different risk scenarios, you are in a sense already preparing for them. At LHV, we are ready for shifts in market narratives and can make quick decisions when necessary.
It is important to align with long-term trends. For example, one of our key long-term themes has been de-globalisation. Today, it is clear that every economic bloc is trying to reduce its dependencies on others. For example, China and Europe are reducing their dependence on the United States. Such developments create a long-term wave of investment in regions where additional large-scale investments are financed through budget deficits. This stimulates economic activity, and we aim to find investments in different regions that are exposed to this trend. We look for investments where the potential gains are proportionally much greater than the possible losses. Today’s market offers good opportunities for doing so.
We also continuously look for investments where we would remain afloat even if the darkest scenarios materialise. This kind of elimination process means that we are able to navigate difficult economic environments better than our competitors.
Our conversation has focused heavily on risks, which always accompany investing. Yet it seems that in recent years, risks have largely disappeared from public discussion. How should this be understood?
I began the interview by saying that index funds may perform well for extended periods, but then fall quickly. No one disputes that for investing small sums, index funds are cost-effective, but today a great deal of money has flowed into them without fully recognising that indices do not work in every period and in every environment.
One of the most instructive examples from last year was that those on autopilot were hit hard by the weakening dollar. This was one of the main realised risks that had not truly been accounted for. At LHV Varahaldus, we believe dollar risk is persistent and we are able to successfully minimise its impact for our customers.
For the United States to continue growing at its current pace, it needs foreign investment on the order of USD 1 trillion per year. Currently, roughly half of that funding comes from Asia and half from Europe. For example, Europeans have purchased USD 10 trillion worth of US securities. However, capital tends to move to where it is treated well. So far, capital has been treated well in the US, but trends over the past couple of years show that capital has a flag and a nationality attached to it. If you anger capital, it will want to return home.
Which narratives could shape financial markets in 2026?
The US will hold mid-term elections, which typically means a more challenging second half of the year for markets. Based on general economic indicators, we are fairly optimistic about the first half of the year, as the US, Europe, and Asia are all showing signs of economic recovery. The second half of the year, when focus shifts more to the power structure in Washington, will certainly create a lot of noise, and investors should be prepared for various scenarios. However, it is important to emphasise that politics is always short term. For investors, it is crucial to capture long-term trends, and I am fairly confident that de-globalisation will continue.
How do you balance taking advantage of market opportunities with maintaining the long-term strategic objectives of LHV’s actively managed funds?
Regardless of the investment, our purchases must be well timed, because ultimately rates of return come from the difference between the buying and selling price. This principle is illustrated by the earlier example of how we bought gold miners back into our funds at a substantial discount just days after selling a large position and taking profits. The window of opportunity to execute those trades at an attractive euro price was about ten minutes. We managed to complete the purchase. The team at LHV Varahaldus is always ready to move between positions because our processes are flexible and fast.
The investment strategy of LHV’s actively managed funds differs from other market participants. What are the main differences that set you apart from competitors?
As Estonia’s largest investment team, we have the capacity to conduct truly in-depth analysis. We can break our investments down to the smallest details, analyse the risks, and build a portfolio that aligns with our expectations for rate of return and risk appetite. Compared to our competitors, we have the capability to carry out significantly more high-quality analytical work.
Other actively managed funds typically move their positions mainly through ETFs. Our process starts from a completely different place. We have our own macro overview and knowledge, in-depth analysis of companies, and we build a very specific portfolio to manage risk effectively.
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