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Lithuanian Investment Index

The Lithuanian Investment Index is developed by INVL Asset Management, one of the leading asset management firms in Lithuania. It shows how return on investment in Lithuania’s four main asset classes has evolved since 1996.

Lithuanian Investment Index (1996-2019)

The index is calculated on the basis of investment returns for short-term debt securities and money market instruments (deposits), long-term bonds, shares and rental housing (as of 2016 calculated net of expenses), each of which is given equal weight. The index shows how the value of these investments has changed each year.

 

Returns on the Lithuanian Investment Index and its component asset classes are presented through the end of 2019: from the inception of the index in 1996, over 10 years (2010-2019), and in 2019.

According to the index, the average annual return on investment in Lithuania during the period of 1996-2019 was 9.7%, while in 2010-2019 it was 5.7%

In 2019, the Lithuanian Investment Index had a 7.1% gain, led by shares in the country, which earned a return of 15.4%, followed by rental housing with an 11.5% gain.

Inflation in 2019 was 2.2% – a rate the country’s long-term bonds, which earned 1.5%, and deposits, which had a 0% return, failed to surpass.

Long-term return on the Lithuanian Investment Index’s asset classes

 

The return on Lithuanian company shares both in 2019 and over the past decade was the highest among the asset classes analysed. Last year, the Lithuanian stock market grew by 15.4%. Despite fluctuations, looking at the last 24 years, the average return on shares in the country was 8.9% per year, and over the last ten years it was 10.5%. In the first quarter of 2020, Lithuania’s shares suffered a 15.1% drop, but that only had a 0.8 percentage point impact on the long-term average return since 1996, which shrank to 8.1%.

 

The return on rental housing in Lithuania in 2019 ranked second among investment classes: the value of investments in housing last year grew by 7.2% or, taking rental income into account, by 11.5%. Looking at the 10-year period (through the end of 2019), the average annual return on rental housing in Lithuania was 6.8%, and over the 24 years for which the index has been calculated – 13.9%, the highest among all asset classes. In the first quarter of 2020, despite contraction, the return on rental housing remained positive and thus the long-term annual return since 1996 decreased only by 0.1 percentage point to 13.8%.

 

Looking at the performance of safe investments – long-term bonds – in Lithuania, the average annual return was 6.2% in the period of 1996-2019 and 3.5% in 2010-2019. Even though the return on Lithuania’s long-term bonds increased in 2019 to 1.5%, for the last three years it has not exceeded inflation. The return on Lithuanian bonds exceeded inflation only for the 24-year and 10-year periods. In the first quarter of 2020, the return on the Lithuanian bonds saw only a slight change, leading to a 0.1 percentage point decrease in the long-term return from 1996 to the end of the first quarter of 2020 to 6.1%.

 

The return on deposits in Lithuania in 2019 stayed at the level of zero for a fifth year in a row and remained the same in the first quarter of 2020 – hence the long-term average return of this asset class did not change since 1996 and stayed at 4.4%. As at the end of 2019, the return on deposits in the country exceeded inflation only over the 24-year period, while in 2019 and over the past decade it fell short of that level.

The return on Lithuania’s 2nd pillar pension funds

2019 was a year of record growth for these funds – nearly 20%, due to which the funds’ average annual gain from their creation in 2004 through the end of 2019 was 5.2%.

Still, in the first four months of 2020 these funds, same as all financial markets, suffered a decline. While in the first quarter the drop was 14.8%, it was followed by a more favourable April. According to the data of the Lithuanian Association of Investment and Pension Funds, the change for the first four months of the year shrank to -8.7% and had a 0.7 percentage point impact on the average annual gain since the funds began operating in 2004 – it was down to 4.5%.

Individual asset classes yield different returns in different periods, so to reduce risk and sustain investment gains, spreading investments over a variety of areas is recommended.

 

Return by asset class in Lithuania
Asset class* 1996-2019m. average annual return (%) 2010-2019m. average annual return (%) 2019m. return (%) 2020m. I quarter return (%) 1996-2020m. I quarter average annual return (%)
Housing for rent (costs estimated from 2016 in Lithuania) 13,9 6,8 11,5 2,3 13,8
Housing price in Lithuania 6,4 2,1 7,2 1,2 6,3
Shares of Lithuanian companies 8,9 10,5 15,4 -15,1 8,1
Lithuanian short-term debt securities and money market instruments (deposits) 4,4 0,7 0,0 0,0 4,4
Lithuanian long – term bonds 6,2 3,5 1,5 -0,2 6,1
Lithuanian 2nd pillar pension funds 5,2** 5,6 19,9 -8,7*** 4,5***
Infliation 3,2 1,8 2,2 0,6 3,2
Lithuanian investment index 9,7 5,7 7,1 -3,2 9,5

* Housing acquisition and rental returns calculated on the basis of Ober-Haus data. ** Since creation in 2004. *** Until the end of April 2020.

The Lithuanian Investment Index is an initiative of INVL Asset Management. Any use of the data herein must identify INVL Asset Management as the source.

Information is provided for information purposes only and cannot be construed as a recommendation, offer or invitation to invest in funds or other financial instruments managed by INVL Asset Management. When investing, you assume the investment risk. Investments can be both profitable and loss-making, you may not obtain financial benefits and you may lose some or even the entire invested amount. Past results of investments do not guarantee future results. When you make an investment decision, assess all the risks associated with investing and the key investor information documents. INVL Asset Management is not responsible for any inaccuracies or changes in this information or for any losses that may arise when investments are based on this information.