07.01.2026
The year 2025 confirmed that in volatile times, actively managed pension funds are able to deliver better rate of return than index funds.
Across the market, the best-performing II pillar pension fund in 2025 was the actively managed LHV Pensionifond Julge, which achieved a rate of return of 16.6% for the year. It was followed by another actively managed fund, LHV Pensionifond Ettevõtlik, with a rate of return of 13.3%. According to Kristo Oidermaa, the Fund Manager at LHV Varahaldus, one of the key strengths of actively managed funds lies in diversification across different asset classes, which provides flexibility and effective risk management. ‘The economy is cyclical. When economic conditions are healthy and stock exchanges are rising, a passive investment strategy can also deliver good results. However, when equity markets reverse, an automated approach can prove costly. Our goal is to preserve and grow asset value even in more challenging periods and best international practice shows that broad-based diversification of asset classes within a pension fund strongly supports long-term resilience,’ Oidermaa said.
Actively managed funds are backed by investment professionals who continuously monitor markets and make rapid adjustments when necessary. For example, they may sell certain equities or increase exposure to more stable assets such as precious metals or real estate. In the case of LHV pension funds, one of the key stabilising pillars is a strong position in gold. In addition, part of the funds’ assets is invested in Estonia, for example, in real estate, which supports the local economy alongside investors’ interests. ‘Although diversification across asset classes may result in slower portfolio growth during stock market rallies compared to index funds, active management helps to avoid major losses,’ Oidermaa noted.
According to Oidermaa, when choosing a pension fund it is important to remember that building long-term security for retirement is a marathon, not a short-term speculation. ‘It is essential to look at 10–15 year performance figures, not just the results of the past couple of years or the level of fees,’ Oidermaa said. History has repeatedly shown, he added, that actively managed funds are better able to adapt to a changing economic environment and provide more stable rate of return for investors than index funds based solely on equity markets.
‘When selecting a pension fund, it is also worth considering what kind of investor you are. Some people are comfortable with higher risk, while others prefer stability and steady growth. The decision should be based on a well-thought-out strategy, not on short-term emotions or passing trends,’ Oidermaa emphasised.
He explained that the core principle of LHV’s actively managed pension funds is that diversification across asset classes does not mean compromising on high long-term rate of return. On the contrary, active risk management and effective portfolio oversight form the foundation of efficient wealth growth over the long term. ‘The investment world is far richer and more interesting than equities alone. We firmly believe that including assets such as precious metals, private equity and venture capital, bonds and real estate in a portfolio does not imply any sacrifice in long-term rate of return. What it does mean is a significantly lower risk of value fluctuations for the client, as different assets do not all move in the same direction at the same time,’ Oidermaa said.
Pension fund rates of return can be compared and analysed on the website at pensionikeskus.ee/statistika.
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