II pillar

LHV Pensionifond XL
Active Management • Aggressive Strategy
10%
-10%
10%
10 year net yield
3
1
7
Risk level
29.36%
0%
100%
Invests into Estonia
35093
Fund investors

Suitable if

  • you have more than 15 years left until retirement,
  • you are prepared to take above-average risks,
  • your aim is the long-term growth of your pension savings.
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Strategy
We allocate up to 75% of the fund’s assets into shares, i.e. obtaining holdings in companies. We invest the rest into bonds and real estate. In 2012, we changed our investment strategy; until then, up to 50% was invested into shares.

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% 18/10/213.64%
EfTEN Kinnisvarafond3.22%
Riigi Kinnisvara 1.61% 09/06/272.89%
France Government 2.25% 25/10/222.59%
East Capital Baltic Property Fund II2.30%
East Capital Baltic Property Fund III2.29%
Berkshire Hathaway 0.25% 17/01/212.21%
Allianz 07/12/202.05%
JP Morgan Chase And Co 27/01/201.94%
HSBC Holdings Plc 04/12/211.89%

Biggest investments in Estonia

Biggest investments in Estonia
Luminor 1.5% 18/10/213.64%
EfTEN Kinnisvarafond3.22%
Riigi Kinnisvara 1.61% 09/06/272.89%

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)186,921,851.25 €
Management companyAS LHV Varahaldus
Equity in the fund500 000 units
Rate of the depository’s charge0,0576% (paid by LHV)
DepositoryAS SEB Pank

Entry fee: 0%

Exit fee: 0%

Management fee: 1.20%

Management fee from 2 September 2019: 0.72%

July 2019 – Our Finnish investments moved in different directions

Kristo Oidermaa, 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%. However, the Japanese stock market rose by 1.2% in local currency and 2.6% as measured in euros. 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%.

Finnish stocks in the pension fund XL portfolio moved in different directions last month. The shares of paper and pulp company Metsä Board dropped by 4.8% in July, as the company reported weaknesses in the II quarter results. Revenue decreased by 8% compared to the same period in 2018 and net profit fell by 13% mainly due to the weakness in the Chinese market. Finnish retailing conglomerat Kesko reported an increase in revenue by 4% to a new record high, and company's shares therefore rose 9.7% during the month.

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

Kristo Oidermaa, Fund Manager

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. Also, the emerging markets index demonstrated good results, showing a 5.7% rate of return measured in local currency. 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.

The German wholesale club retailer Metro AG, belonging to the pension fund XL portfolio, received a takeover bid for all shares in June and, thanks to that, the share price of the company increased by 13.9% over the month. This is the world’s eighth largest wholesale and retail chain, with nearly 800 stores in 25 countries. The supervisory board of Metro AG advised shareholders to reject the bid for now, as it considers the price to be too low.

Also, Finnish forestry companies Store Enso and Metsä Board provided a good rate of return in June, with share prices increasing by 9.2% and 15.9%, respectively, in a month.

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 – Investment in Slovenian sports equipment manufacturer

Kristo Oidermaa, 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. Within a month, the US S&P 500 index decreased by 6.6% in local currency and the Chinese stock exchange index by as much as 13.6%. 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%.

The private equity fund KJK Fund III, a member of the XL Pension Fund portfolio, made a new investment in Elan, a Slovenian sports equipment manufacturer. The company produces, for example, winter sports equipment and sailing yachts and is among the world's leading producers in its field. Previously, the KJK has invested in the Estonian water sports equipment company Tahe Outdoors.

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.