LHV Pensionifond L

February 2025: Europe raising head

Kristo Oidermaa and Romet Enok, Fund Managers

February was quite volatile due to Donald Trump’s inauguration. The US S&P 500 index declined by 1.4% in dollars over the month. The Euro Stoxx 50 index rose by 3.4% in euros. The Emerging Markets Index gained 0.4% in dollars, with China’s market rising by 11.7%. The OMX Baltic Benchmark Index climbed 3.2% over the month.

In February, we reduced our gold and energy positions and exited our holding in Metso Corporation. We also added exposure to Germany’s mid-cap and small-cap index. Contributing the most to returns over the month were our position in Alibaba, which surged by approximately 44%; the European banking index fund, which gained about 13.5%; our gold miner, which rose by 8.9%; and Finnish energy company Fortum, which increased by 7.8%. The poorest performers which our energy holdings, which declined between 19% and 25%, and our U.S. industrial stocks, which fell between 8% and 15%. Over the past year, we have been steadily diversifying our portfolios, adding high-capital-efficiency market leaders in their niches alongside cyclical commodity companies, both in Scandinavia and the United States. Over the past month, we have also increased our exposure to Continental Europe.

EfTEN Kinnisvarafond II sold the Kaunas Terminal Logistics Complex in February to the Lithuanian asset management firm Prosperus. The transaction was valued at 18.2 million euros. The complex covers 28,737 square metres and is located in a key industrial area. Prosperus is one of Lithuania’s largest real estate investors and is known for its strategic investments in high-potential properties across the Baltic region.

January 2025: The year started strong in the stock markets

Kristo Oidermaa and Romet Enok, Fund Managers

The year started strong in developed markets. The US S&P 500 index ended January with a return of +2.7% in dollar terms, while the European Euro Stoxx index gained 8.1% in euros. The emerging markets index rose 1.7% in dollar terms, with its largest constituent, China, increasing by 0.6%. The OMX Baltic Benchmark index climbed 5.3% in euros over the month.

In January, we sold our position in Volkswagen stock, with no other major transactions taking place. The strongest contributors to returns were our gold positions, which rose 8–19%, and the European banks index fund, which gained around 11%. The biggest detractors were our position in Freeport-McMoRan, an energy metals company, which declined by 5.5%; logistics firm DSV, which fell by 6%; and Occidental Petroleum, which dropped by 5.6%. Over the past year, we have gradually diversified our portfolios, balancing cyclical commodity holdings with high-return-on-capital companies that are market leaders in their niches, both in Scandinavia and the United States.

In January, the private equity fund INVL announced an agreement to sell InMedica Group, Lithuania’s largest private clinic and hospital network, to Mehiläinen, Finland’s largest healthcare provider. The transaction will be finalised once it receives approval from competition authorities in both countries. InMedica serves more than 2.7 million patients annually across 89 facilities in Lithuania, Finland, Sweden, Germany and Estonia, generating over €150 million in annual revenue. Mehiläinen, with a 115-year history, and operations in Finland, Sweden, Germany and Estonia, aims to strengthen its position in the Baltic region, where the healthcare market is experiencing rapid growth.

Latvia’s Citadele Bank repaid its subordinated bond issued in 2017. The bond was listed on the stock exchange, but LHV pension funds remained an anchor investor throughout, as part of our 2016–2019 investments in subordinated bonds from local Baltic banks – Siauliu in Lithuania, Citadele in Latvia, and Coop and Bigbank in Estonia. Over this period, Baltic banks have expanded their businesses and market shares, while also developing a public market for their subordinated bonds. Pension funds earned strong interest from these and contributed to the growth of the local financial sector.

December 2024: Markets show signs of calming

Kristo Oidermaa and Romet Enok, Fund Managers

Following November’s “Trump rally”, December saw a slight pullback, with S&P 500 ending the month down 2.5% in dollar terms. By contrast, the Euro Stoxx 50 index rose by 1.9% in euro terms, while the Emerging Markets index was nearly flat, posting -0.3% in dollar terms. Among emerging markets, Brazil was the biggest decliner, but this was offset by China, which rose by 2.6% in dollar terms. The OMX Baltic Benchmark index also increased by 1.6% for the month.

In December, we added new names to the portfolio, including the US company United Rentals, which specialises in construction equipment rental, and Novo Nordisk, a pharmaceutical company. The strongest contributors to returns during the month were the European banks index, which rose by approximately 5.4%, Stora Enso, which gained 6.8%, and one of our energy positions, Antero Resources, which rose by 7.2%. On the downside, our gold-related positions fell between 6% and 12%, while our energy-metals holdings declined between 9% and 14%. Throughout the year, we have been steadily diversifying our portfolios, adding high-capital-efficiency companies that are market leaders in their niches across Scandinavia and the United States alongside cyclical commodity investments.

At the end of 2024, private equity funds were quite active. KJK Funds sold one of their largest investments, Don Don, a Balkan-based bakery chain, to Grupo Bimbo, a globally renowned Mexican baked-goods giant. Don Don, which began operations in 1994 in Slovenia, has steadily expanded into Croatia, Serbia, Bulgaria and several other European countries. The deal provided Grupo Bimbo with access to new markets.

In the bond portfolio, Citadele Bank announced to the stock exchange that it plans to redeem its subordinated bond issued in 2017 in January. This news fittingly concluded a year during which the fund exited several bond investments both in Estonia and across European markets.