Year 2014 was a favourable one for investment funds registered in Finland. The aggregated capital of these funds expanded by over EUR 10 billion to stand at EUR 86 billion at the end of the year. This information is based on the Investment Funds 2014 Annual Review published in Finnish today by the Bank of Finland. The English version of the Review will be published on 27 March 2015.
The value of the funds' equity investments increased on the back of general market developments, and the decline of long-term market rates improved the return on fixed-income investments. As deposit interest rates sunk to record lows in 2014, funds proved attractive investments due to their higher expected returns. During the year, a total of EUR 5.4 billion flowed into the funds as new capital, a good billion euro more than a year earlier. The other half of the increase was due to positive market developments. The capital appreciation of the investments, resulting from price revaluations and foreign exchange changes, amounted to EUR 5.3 billion.
Insurance corporations' share of ownership in investment funds rose. At the end of 2014, insurance corporations held fund units amounting to over EUR 22 billion, over a quarter of the entire stock of fund capital. However, a significant proportion of insurance companies' fund holdings is ultimately owned by households and other policy-buyers, being channelled into investment funds through unit-linked insurance policies.
Households made fund investments actively. Almost throughout the year, their new subscriptions exceeded redemptions, and the stock grew to almost EUR 17 billion by the end of the year. While households have invested their assets in funds, they have reduced their fixed-term deposits with banks. The low level of interest being paid on fixed-term deposits has made households seek alternative investments with better expected returns. At the same time, this means that the risks related to households' investment wealth have increased.
Finnish investment funds increased their investments in the United States and withdrew investments from Russia. Investments by investment funds were allocated particularly to bonds issued by European non-financial corporations and financial institutions, as well as equities of US companies. The improvement of US economic prospects was clearly reflected in investment decisions made by the funds. As an equity investee country, the United States surpassed Finland and took the place of the largest single investee country. Russia's economic prospects weighed materially on Finnish investment funds' investments in Russia. Although the retreat of Finnish investment funds from Russia was particularly fast in 2014, many funds had reduced their exposures in Russia already during the previous years. These investments peaked in February 2011, when a total of 3.6% of the capital of the funds was invested in Russia. By the end of 2014, the proportion had shrunk to 0.3%.
For further information, please contact:
Johanna Honkanen, Economist, johanna.honkanen(at)bof.fi, tel. +358 10 831 2992,
Topias Leino, Economist, topias.leino(at)bof.fi, tel. +358 10 831 2315