II pillar

LHV Pensionifond S
Active Management • Balanced Strategy
10%
-10%
10%
10 year net yield
2
1
7
Risk level
12.87%
0%
100%
Invests into Estonia
10649
Fund investors

Suitable if

  • you have less than 3 years left until retirement,
  • you have low risk tolerance,
  • your aim is the preservation and modest growth of your pension savings.
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Strategy
We invest your money into corporate bonds. They offer stability in the maintenance of your money and are not affected as much by the prevalent economic situation as corporate shares. Up to 25% of the fund’s assets can be invested into real estate, infrastructure, equity funds and convertible bonds. The growth of your pension savings is limited, but will be stable.

Performance
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Current year
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Biggest investments

The data is presented as at 31.07.2019

Biggest investments
Temasek 0.5% 01/03/224.66%
Latvenergo 1.9% 10/06/224.51%
Luminor 1.5% 18/10/214.43%
Riigi Kinnisvara 1.61% 09/06/274.16%
Transpordi Varahaldus 2.85% 18/04/254.09%
Investor 4.5% 12/05/233.47%
TOTAL 03/19/203.12%
Romania 2.875% 28/10/242.95%
SANOFI 1.875% 04/09/202.68%
Allianz 07/12/202.61%

Biggest investments in Estonia

Biggest investments in Estonia
Luminor 1.5% 18/10/214.43%
Riigi Kinnisvara 1.61% 09/06/274.16%
Transpordi Varahaldus 2.85% 18/04/254.09%

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)57,753,691.84 €
Management companyAS LHV Varahaldus
Equity in the fund270 000 units
Rate of the depository’s charge0,0576% (paid by LHV)
DepositoryAS SEB Pank

Entry fee: 0%

Exit fee: 0%

Management fee: 0.672%

July 2019 – Finding new investments is difficult, but not impossible

Romet Enok, Fund Manager

It is becoming increasingly clear that the interest cycle is turning. In July the Federal Reserve lowered interest rates for the first time since 2008 and a consensus is forming that the European Central Bank is going to follow the same path shortly.

The price increase of bonds is therefore natural, but extraordinary when we consider at how extremely high price level this movement takes place. Thus, as of the beginning of August, all German government bonds trade with a negative expected yield, even those that end in 30 years.

The situation for investors, however, becomes even more dangerous, as the price of credit for businesses has also decreased. While writing this, the expected future return on major European corporate bonds is on average 0.3% a year! In this situation, the fund's probable next step is to further reduce risks by selling long-term bonds.

It is difficult, but not impossible, to make new investments. The slightly more than the 5% increase of Finnish insurance group's (Sampo) bonds during July proved this. We made the investment in June and it has already given us a return of 12% in a few weeks.

June 2019 – Focus more on local opportunities instead of international bonds

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%.

May 2019 – Changing the fund terms and conditions opens up new opportunities

Romet Enok, Fund Manager

In terms of new issues, we participated in another bond issue of the Latvian public finance company Altum. As the company belongs to the Latvian State and participates in the implementation of public policies, these bonds can be compared to government bonds. In doing so, a somewhat higher interest rate allows a long-term investor to earn more than while holding government bonds.

We recently changed the terms and conditions of the S fund and, as a result, expanded the range of investments that the fund can make. One such investment was the Finnish financial group Sampo that sold new bonds last month, the largest assets of which are If insurance and a large holding at Nordea Bank. The largest owners of the company are the Finnish State and its pension funds. Sampo has the right to repay the bonds after ten years, as long as the annual interest is 3.375%.

In international bond markets, the pessimism regarding economic prospects deepened and the number of debt securities, expected to have a negative rate of return in the end, is increasing. With the support of the fund’s new terms and conditions that provide more opportunities, we are working on adding OTC and higher-interest bonds to the fund in the future.

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.