2025 Was a Challenging Year in the Financial Markets
In 2025, the performance of almost all investment groups was satisfactory.
However, global equities performed worse, and since this part makes up the largest share, it negatively affected the return in 2025.
LÍV is compared with Danish pension funds. A prerequisite for this comparison is that the investment composition of LÍV and the Danish pension companies is similar. Therefore, three years ago LÍV began updating its investment strategy, where the benchmark for comparison was based on a customer with medium risk and more than 15 years remaining until retirement age.
Looking at the overall picture, these changes moved the results in the right direction—especially in 2024, when the return for a customer with medium risk was above 10%. But in 2025, the performance of global equities was worse—partly because the U.S. dollar weakened relatively significantly. This affected last year’s return, which ended at 1.77% for a customer with medium risk. That is not satisfactory.
LÍV evaluates returns monthly, so the 2025 result did not come as a surprise to the company. This knowledge has led LÍV to make changes to the investment composition. For example, the composition of the High Yield (corporate bond) investment group has been adjusted, and in 2025 LÍV also began purchasing passive investment funds (index funds) that follow the market and partly hedge against U.S. currency risk.
Investments in Real Estate
In recent years, LÍV has also invested in so-called “alternative investments”, such as real estate or private equity. As the only pension fund in the Faroe Islands, LÍV builds rental apartments, but it takes a long time to get this type of investment underway, and therefore they initially affect returns negatively.
The company has a goal of building about 100 rental apartments by summer 2027. It is expected that 64 will be rented out by September 2026, while 22 apartments, built together with Bústaðir, have been on the market for about a year.
However, these investments ensure value growth in pension savings over the long term and benefit Faroese society. Therefore, LÍV is pleased to be an active participant in the Faroese housing market.
Fundamental Differences
The performance of selected global equity investment funds has not been as good as LÍV had expected. As a result, in 2025 LÍV also began purchasing passive investment funds that follow the market.
However, there are some differences between LÍV and its Danish competitors. This is shown in the 2025 evaluation and in the years before.
One difference is that Danish companies hedge against currency risk in the U.S. dollar. LÍV has not used this approach because it has a built-in cost. In the first half of 2025, this created a difference in returns of 2.9% compared with a company that hedged against currency risk.
Another difference is that LÍV’s investments have not been as strongly tied to the M7 technology stocks.
M7 stands for the “Magnificent 7” and refers to shares in the American technology companies Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla, which had unusually high returns in 2025.
These stocks carry high risk because investments are concentrated in only a few companies. They make up more than one third of the S&P 500 index, and if their value falls, the impact can be significant.