II pillar

LHV Pensionifond M
Active Management • Balanced Strategy
10%
-10%
10%
10 year net yield
2
1
7
Risk level
31.97%
0%
100%
Invests into Estonia
13367
Fund investors

Suitable if

  • you have 3–10 years left until retirement age,
  • you have moderate risk tolerance,
  • your aim is the long-term stable growth of your pension savings.
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Strategy
We allocate most of the funds into bonds, which offer stability when it comes to the preservation of your money. For added balance, we also invest into real estate and enterprises to allow for stable growth by your pension savings. Up to 25% of the fund’s assets will be allocated to shares, that is, holdings in companies will be acquired. We invest the rest into bonds and real estate.

Performance
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Current year
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Biggest investments

The data is presented as at 31.07.2019

Biggest investments
Luminor 1.5% 18/10/213.70%
EfTEN Kinnisvarafond3.31%
Riigi Kinnisvara 1.61% 09/06/273.00%
France Government 2.25% 25/10/222.58%
Berkshire Hathaway 0.25% 17/01/212.49%
Transpordi Varahaldus 2.85% 18/04/252.39%
Tartu linn 25/10/322.03%
JP Morgan Chase And Co 27/01/201.96%
BNP Paribas 0.75% 11/11/221.96%
Coop Pank 6.75% 04/12/20271.82%

Biggest investments in Estonia

Biggest investments in Estonia
Luminor 1.5% 18/10/213.70%
EfTEN Kinnisvarafond3.31%
Riigi Kinnisvara 1.61% 09/06/273.00%

Asset Classes

The data is presented as at 31.07.2019.

Information about the fund

Information about the fund
Volume of the fund (as of 31.07.2019)126,886,440.51 €
Management companyAS LHV Varahaldus
Equity in the fund380 000 units
Rate of the depository’s charge0,0576% (paid by LHV)
DepositoryAS SEB Pank

Entry fee: 0%

Exit fee: 0%

Management fee: 0.96%

Management fee from 2 September 2019: 0.72%

July 2019 – Latvian real estate fund contributed to the performance

Romet Enok, Fund Manager

In July, there were no significant fluctuations in the global stock market, but against the backdrop of a cooling economic environment, the Federal Reserve lowered the base interest rate by 0.25 percentage points and the European Central Bank dropped a hint about the upcoming monetary easing measures.

In Europe, stock markets in most of the countries showed negative returns. For example, the German stock market index dropped by -1.7% during the month and the Finnish stock exchange was lower by -1.3%. In the Baltics, the best results were made by the Vilnius Stock Exchange with a gain of 4.3%, largely due to 12.1% and 9.9% price jump of the shares of Apranga and Šiauliu Bankas respectively. The Tallinn Stock Exchange made a modest 1.0% increase in July, and Riga's stock market grew by 1.7%.

Latvian Real Estate fund SG Capital, an investment that we made in the spring of this year contributed to the performance of pension fund M. The fund owns three offices in Riga, the biggest of which is the Skanste Business Centre, a complex of office buildings located in the rapidly evolving Skanste business district, where there is currently an active construction and expansion. After completion of the buildings, more than 4000 people will work there.

In the bond portfolio, we have continued to focus on local investments as we are entering the final phase of the negotiations with a couple of potential transactions. Even a small-scale investment in the local market currently promises a significantly greater positive impact on the fund's result compared to a very big investment in international markets.

At the beginning of August, the bond market of major European corporations had an average expected return of just 0.3% per annum. Half-jokingly one can say that it is considerably better than the yield of government bonds, where, by now, even the German 30-year-old bond has a negative expected yield, but for the rational investor it is of little help.

The change of monetary policy contributed to the price increase of bonds, as the Federal Reserve in late July lowered interest rates for the first time since 2008. And in euro area the central bank is expected to walk the same path. As a result, all major bond markets remained on the plus side in July by 0.5 to 1.5 per cent. In our portfolio, again, the bonds issued by the Finnish insurance group Sampo, which were acquired in June, showed the best result by increasing 5% in July. Those bonds have now brought the fund a 12% return in a matter of few weeks.

June 2019 – Expectations of loose fiscal policy supported stock markets

Romet Enok, Fund Manager

Bond markets throughout the world have clearly set course towards a major cooldown of the economy, expecting new support measures to be implemented by central banks. This is why the prices of government bonds (6%) as well as corporate bonds (5.4%) experienced an upsurge in Europe in the first half of the year.

In June, we took advantage of this situation and sold, from amongst our long-term and accordingly higher-risk securities, Lithuanian Energy. The bonds issued by the company in 2017 and 2018 yielded above 8% and 5%, respectively, for the fund. There is no way the bonds of such a large company can offer such a high rate of return for an extended period of time in the current interest environment. We plan to invest the sales proceeds into local bonds with a higher rate of return.

We are continuing negotiations with several local companies and expect attractive additions to our portfolio in the second half of the year. Local bonds increase the funds’ rate of return in the form of interest, while international bonds do so mainly through price movement. This is why international bonds show a better rate of return at times of steep market increases; yet, as an average of several years, the higher interest of local bonds will give a better return.

For example, the average rate of return of the European bond markets has been 3-4% over the last 5 years. We make local investments only if the interest level is clearly higher. Of course, we will keep our eyes open, to also take advantage of the opportunities presented by international markets; since the fact that the markets as a whole have an overly high price level does not preclude finding individual good opportunities. It was in this way that the price of the bonds of the Finnish insurance firm Sampo, acquired in May, showed an extraordinary monthly increase, exceeding 6%.

June was positive for global stock markets: both, the stock exchanges of developed and developing markets provided a good rate of return. The increase can be attributed mainly to the continued loose fiscal policy of the US Federal Reserve as well as the European central banks, and accordingly, to the expectations of investors that the low interest environment will remain.

The level of the Euro Stoxx 50 index, including the 50 largest public companies of the Eurozone, rose 6% over the month and by countries, the top risers were Germany and France. In June, the Japanese stock market index increased by 3.3% in local currency and by 2.1% measured in euros. Baltic stock markets lagged behind the general growth trend of the last month: only the Tallinn Stock Exchange was able to give a positive rate of return with 1.2%. The stock exchanges of Riga and Vilnius declined by 2.7% and 1.7%, respectively.

Private equity fund INVL Baltic Sea Growth Fund, included in the portfolio of pension fund M, made its third investment. This was the pulp and paper manufacturer Grigeo investicijų valdymas, which evolved from the Lithuanian timber company Grigeo Group, which mainly reprocesses used paper and manufacturers corrugated cardboard products. This is the biggest company within the sector in the Baltics, benefiting from the increasing demand for cardboard products, for example, in connection with the growing e-trade.

May 2019 – Participating in the Baltic Horizon bond issue

Romet Enok, Fund Manager

After several peaceful and rather positive months, the world's stock markets were offering a predominantly negative rate of return in fear of the American and Chinese trade war. In Europe, Sweden, with a result of -9.9%, and several southern European countries went through the largest decline.

The German and Finnish stock exchange made it through somewhat better: both fell by 5% in May. The Japanese stock market index decreased by 7.4% in local currency, and in euros the rate of return was -4.8%. The general recession also included the Tallinn and Vilnius Stock Exchange, with, respectively, a -1.4% and -0.8% rate of return in May. However, the Riga stock exchange index increased by 2.4%, largely due to the increase in the share prices of the pharmaceutical manufacturers Grindeks and Olainfarm, which was almost 8%.

In April, the long-lasting dispute between the main shareholder of Grindeks and the Latvian Financial Supervision authority was resolved and in May the official buyout offer price was announced: EUR 12.59. While, before the sharp rise in April, the Grindeks share was traded at EUR 8, the price increased by the end of May to EUR 12.2. This makes the rate of return more than 52%. The M pension fund plans to accept the buyout offer and sell all shares.

The Real Estate fund Baltic Horizon, listed on the Tallinn Stock Exchange, issued the third and last part of bonds. They are subject to the terms and conditions agreed during the first issuance of the company in spring last year: the annual interest is 4.25% and the maturity date is now just under four years away. The company also has the right to repay the bonds in advance by paying the investors up to 2% as extra payments. Representing the interests of pension collectors, we actively participated in settling on the conditions in spring 2018. Therefore, we also bought more bonds from this issue. They are now also listed on the Tallinn Stock Exchange and have in the meantime received an international credit rating. LHV's pension funds hold just over 40% of the Baltic Horizon bonds.

In terms of new projects, we started negotiations on possible participation in establishing a new dairy industry in Paide, funded by E-Piim, the Dutch investor Interfood, and the Agricultural Registers and Information Board. We also have other local projects currently being negotiated. Soon, we hope to add them to our portfolio with an attractive rate of return.

On the other hand, international bond markets still offer prospects with a very low rate of return, due to which we only make individual investments when we find attractive opportunities. One such investment was the Finnish financial group Sampo, which sold new bonds in May. The company's largest assets are If Insurance and a large holding in Nordea Bank, and the company’s largest owners are the Finnish State and its pension funds.

Underestimated impact of new changes
Andres Viisemann, Head of LHV Pension Funds

July was notably more eventful on the securities markets than the monthly returns of stock indices and bonds might suggest. The first half of the month saw an upward trend on global stock markets, with the final days of the month yielding back some of that growth.