II pillar

LHV Pensionifond M
Active Management • Balanced Strategy
10%
-10%
10%
10 year net yield
2
1
7
Risk level
31.71%
0%
100%
Invests into Estonia
13840
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

When investing in assets, the fund prefers cash-flow assets and, where possible, the local market, including less liquid private equity and real estate investments. The investments are predominantly in local currency and up to 75% of the fund's assets can be invested directly in equities. The fund's long-term preferred asset class is real estate investments.

Performance
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The Fund's return is expressed as the net yield after deduction of all fees.

Biggest investments

The data is presented as at 31.05.2020

Biggest investments
German Government 3.25% 04/07/213.40%
German Government 2.25% 04/09/213.34%
EfTEN Kinnisvarafond3.30%
Luminor 1.5% 18/10/213.28%
Riigi Kinnisvara 1.61% 09/06/272.76%
France Government 25/05/212.39%
France Government 2.25% 25/10/222.28%
JP Morgan 1.375% 16/09/212.07%
Transpordi Varahaldus 2.85% 18/04/251.90%
BNP Paribas 0.75% 11/11/221.76%

Biggest investments in Estonia

Biggest investments in Estonia
EfTEN Kinnisvarafond3.30%
Luminor 1.5% 18/10/213.28%
Riigi Kinnisvara 1.61% 09/06/272.76%

Asset Classes

The data is presented as at 31.05.2020.

Information about the fund

Information about the fund
Volume of the fund (as of 31.05.2020)138,715,786.27 €
Management companyAS LHV Varahaldus
Equity in the fund380 000 units
Rate of the depository’s charge0,0564% (paid by LHV)
DepositoryAS SEB Pank

Entry fee: 0%

Exit fee: 0%

Management fee: 0.60%

Success fee: 20% per annum on any increase in the fund's rate of return over the cumulative increase of Estonian social security pension contribution as of 31.08.2019.

Ongoing charges (inc management fee): 0.84%

The ongoing charges figure is an estimate based on the current management fee and the 2019 level of all other recognized costs. Ongoing charges may vary from year to year.

May 2020 – We added two new bond investments to the portfolio

Kristo Oidermaa and Romet Enok, Fund Managers

Global equity markets continued to rebound in May and returns were positive on stock exchanges of developed countries as well as on most emerging markets. The Euro Stoxx 50 index, which brings together the largest stock companies in the euro area, added 4.7% during the month.

Finnish (6.9%) and German (6.7%) stock exchanges showed the best returns and LHV pension funds have also made large investments in the stock markets of both countries. The return of the Japanese Nikkei index was 8.3% in local currency and 5.9% in euros. The upward trend also continued on Baltic stock exchanges, of which Tallinn Stock Exchange showed the best return at 5.7% growth. Vilnius stock exchange ended up showing a 3.8% return, followed by Riga stock exchange with 2.4%.

In May, Tallink Group, which belongs to the M pension fund portfolio, published its financial results for Q1 2020. The company’s turnover decreased by 13.4% y-o-y, while loss increased by 19.6%, amounting to more than 30 million euros. Even though the first months of the year were good for Tallink, the closing of the borders due to the pandemic cut the number of passengers by 59% in March and 96% in April. For the company to survive this difficult time, the state decided to grant Tallink a loan of 100 million euros with a term of three years and an interest of 12 months’ Euribor plus 2% per year. Tallink stock price was up by 20.6% on the stock exchange in May.

Bond markets also continued to recover. Prices in May generally followed the principle that the more high-risk the borrower, the more the price of their bonds increased. Markets are clearly dominated by the view that central banks will cover all risks for investors. Whether this turns out to be true will be revealed in the following quarters along with the impact of the recession on individual companies and states.

We also made new bond investments when Lithuanian national energy company Ignitis and the Romanian government borrowed money for 10 years with an interest rate of slightly over 2% and 3.5% respectively.

Some borrowers who are raising new money must currently pay a premium that is larger than usual in order to attract investors and thus Ignitis’ and Romanian bonds generated additional return for the fund in an amount almost equal to annual interest already by the end of the month.

April 2020 – Risk appetite of investors restored in April

Kristo Oidermaa and Romet Enok, Fund Managers

After a decline in February and March, the global stock markets began to recover rapidly in April, and the index MSCI World rose by 11.1% during the month. The good mood on the markets is mostly the result of record support measures promised by state governments. In Europe, the stock exchanges in Finland and Germany rose the most, with rates of return being 10.1% and 9.3%, respectively, in April. The value of Japanese Nikkei index rose by 6.7%, measured in local currency, and 7.9% in euros.

Also, the Baltic stock markets have recovered well: the Vilnius stock index rose by 15% and the Tallinn and Riga stock exchanges offered a return of slightly above 11%. However; year-to-date, the Baltic stock markets still remain in the red, as is the case with all global markets.

In April, Q1 results were published by Lithuanian tour operator Novaturas, whose activity has, in essence, stopped, as no trips are taking place. Despite the strong start to the year, the company’s turnover dropped by 18.9% in Q1 compared to 2019, and net loss worsened. As the travel ban resulting from the emergency situation will likely continue to exist for some time, we can continue to expect very weak performance from the company in the coming quarters.

Bond markets have recovered to varying degrees from their sharp decline in March. While in the United States, the bond prices of companies with stronger as well as weaker solvency have increased sharply as a result of the extremely aggressive measures taken by the Federal Reserve, in Europe price movements have been considerably more modest.

There have been several price fluctuations among listed bonds, but considering the severity of the current situation in the real economy, the decline has still prevented the creation of attractive investment opportunities. We will be ready to respond promptly as soon as these open up, as we keep a considerable volume of highly-rated liquid bonds.

From our local bond investments, the activity of Transpordi Varahaldus (leases planes to Nordica) and the Peetri Centre are the most hindered. At the same time, state support for TVH and permission to keep open the grocery stores at Peetri Centre is of help.

March 2020 – We moved from Berkshire Hathaway bonds to its shares

Kristo Oidermaa and Romet Enok, Fund Managers

In March, the global stock market decline continued due to the spread of the corona virus and the fear of an economic crisis and, as a result, the first quarter of 2020 was one of the weakest ever for global stock exchanges. The Euro Stoxx 50 Index, which includes the large enterprises of the Eurozone, lost 16.2% of its value in March and fell by a total of 25.3% throughout the first quarter.

At the same time, the stock exchange indices of the largest European countries fell by more than 10% in March, and by more than 20% in Southern Europe. The value of the Japanese stock market index declined in March by 10%, measured in euros, and in the first quarter by a total of 17.4%. Stock markets in the Baltic Republics also continued to decline, with the Tallinn Stock Exchange dropping by a total of 20% in March. The Vilnius stock index dropped by 12.1% and the rate of return for the Riga Stock Exchange was –10.8%.

At the beginning of the month, the Lithuanian real estate fund Lords LB Baltic Green Fund, part of the pension fund M portfolio, made its first investment by acquiring an office building complex in the city centre of Vilnius. The complex includes more than 17,000 square metres of rental premises and the fund also sees the potential to build new buildings there and thus increase the rental income.

As a notable change, we sold the short-term Berkshire Hathaway bonds when the stock markets declined and instead acquired a position in the same company’s shares.

More things have happened in large bond markets in March than sometimes do over a period of five years. The spreading virus caused bond prices to drop and, what’s more important, even the world’s largest enterprises almost completely lost the opportunity to borrow any money.

Central banks intervened with measures that were essentially the same as those used during the crisis ten years ago, although they did so more vigorously and quickly this time: banks were offered support and, for the first time, loans were issued directly to enterprises. Nevertheless, at the end of the month the losses on the European and US corporate bond markets were still between 6% and 15%. On some markets, the rise of the last three years was wiped out all at once.

Although the measures employed by central banks helped to stop the price drop, the problem remains. The extremely low interest rates of the last decade have allowed many lower rated enterprises to become so indebted that, according to the latest assessment of the International Monetary Fund, around 40% of all enterprises may find themselves in default during the next crisis. This crisis has arrived.

As our monthly overviews have emphasised in recent years, we are mainly investing in high-rated and short-term bonds. Doing so has allowed us to avoid enterprises that have borrowed substantial sums of money as well as long-term bonds, which were hit in March.

By the end of March, the majority of the fund’s bonds portfolio (almost one-half) were the bonds of European Union governments and public sector companies, and larger financial institutions from the United States of America. Bond markets are facing a tough time and we are ready to take and advantage of the emerging opportunities.

Cheap credit leads into temptation
Andres Viisemann, Head of LHV Pension Funds

There is no doubt that we are living in extraordinary times. At the end of March, the economies of the world’s biggest countries were partly transferred to a special regime and many economic sectors were more or less shut down. Those who could do so worked from home, but not every product and service can be created and delivered to customers by virtual means.