Developments in the international capital market made the return on the University of Helsinki’s securities investments -15.67% in 2022, while the benchmark index generated a return of -12.90%. The difference was primarily explained by the exclusion of fossil fuel–producing businesses from the investment portfolio as well as the halving of the market value of listed spinouts. The loss of listed bonds, roughly one percentage point below that of the index, contributed to improving the relative return. In 2022 the return on investment in securities was in line with the returns of investors pursuing similar investment strategies.
“The year 2022 presented a market risk – or, more precisely, a systematic risk – from which we can expect returns in the long term. Financial economics demonstrates that the expected return is proportional to this systematic risk, which cannot be mitigated by diversifying investments further,” says Chief Investment Officer Anders Ekholm of the University of Helsinki.
From 2019 to 2022, the securities investments of the University of Helsinki have generated an average return of 11.14% per year, clearly exceeding the long-term real return target of 4%. In the same period, the benchmark index has generated an average return of 7.40% annually, making the difference an average of 3.74 percentage points per year. However, this four-year period is too short to make statistically significant conclusions on the level or difference of returns.
“While the return on our investments has so far clearly exceeded our expectations at the time of introducing the current strategy in 2019, we cannot yet draw reliable conclusions from it. Such conclusions are likely to require roughly 10 years of returns, preferably encompassing both emerging and declining markets. Of course, more than 90% of our investments are listed, improving the reliability of returns, as uncertainty over the valuations of these securities is relatively low,” Ekholm adds.
The University of Helsinki will continue its long-term investment activities by following an investment strategy based on financial economics and the promotion of sustainable development, regardless of short-term fluctuations of the securities market. For example, excluding fossil fuel–producing businesses helped to reduce the TCFD (Task Force on Climate-Related Financial Disclosures) carbon footprint of EQUITY investments to roughly half of that of the benchmark index.